Year to date, shares of electric-car maker Tesla(NASDAQ: TSLA) are down more than 8%. This poor performance is despite CEO Elon Musk’s confirmation in a post on X this week that the company expects to begin selling steering-wheel-free all-electric Cybercabs for less than $30,000 before 2027. In addition, he recently doubled down on his prediction that the company will begin producing this two-seat car in April.
And this isn’t the only potential catalyst for the stock. The company is steadily ramping up its autonomous ride-sharing service, Robotaxi, which Musk said in the company’s most recent earnings call could be “in dozens of major cities by the end of the year.”
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The most commonly cited reason for the mismatch between the stock’s performance and Tesla management’s upbeat commentary is the company’s weak financial performance. Tesla’s total revenue fell 3% year over year in 2025 as automotive revenue sank 10%. Even worse, Tesla’s earnings per share tanked 47%.
But I’d argue there’s an even bigger problem that could plague the stock: the company may not be spending money fast enough to justify its pricey valuation. After all, if Tesla’s growth opportunities are so monumental, why were its capital expenditures so small relative to the company’s market capitalization in 2025, and why aren’t its spending plans for 2026 even more ambitious?
Cybercab. Image source: Tesla.
In 2025, Tesla’s capital expenditures were $8.5 billion. Not only is this small relative to the company’s market capitalization of more than $1.5 trillion as of this writing, but it’s actually a decrease from its $11.3 billion in capital expenditures in 2024 and even below its 2023 capital expenditures of $8.9 billion.
To the company’s credit, Tesla expects to spend far more in 2026 than it did in 2025. Specifically, management guided for 2026 capital expenditures to be “in excess of $20 billion.”
But even this is fairly small in the context of the company’s market capitalization. Further, it will be spread thin across a number of priorities.
“We will be paying for six factories, namely the refinery, [battery cell] factories, CyberCab, Semi, a new mega factory, the Optimus factory,” explained Tesla chief financial officer Vaibhav Taneja in the company’s fourth-quarter earnings call.
The CFO continued:
On top of it, we’ll also be spending money for building our AI compute infrastructure and we’ll continue investing in our existing factories to build more capacity. And then, you know, also the related infrastructure along with it. We’ll also further expand our fleet of robotaxi and Optimus.
For the uninitiated, Optimus refers to Tesla’s humanoid robot. So we’re talking about laying the groundwork for multiple new vehicles, costly AI infrastructure, battery cell production, and a humanoid robot. No biggie.
My worry is that this capital will be spread too thin or the company isn’t spending enough to capitalize on its growth opportunities effectively, or both.
But before investors give up on Tesla, it’s worth noting that Tesla has historically been extremely capital-efficient, so I wouldn’t rule out the possibility that the company can achieve a significant return on invested capital with its planned financial outlay.
Still, $20 billion isn’t much in the context of both the company’s staggering market capitalization and Tesla’s ambitious vision for a scaled autonomous ride-sharing fleet and an army of humanoid robots.
While companies can only spend money so quickly, this doesn’t change the fact that Tesla may not be executing fast enough to justify its mind-boggling valuation.
All of this is a long way of saying that I wouldn’t be surprised if 2026 is a great year of execution for Tesla, but its current valuation may ask for more than the company can deliver. Still, given the company’s history of getting the most out of limited capital expenditures, I can’t rule out the possibility of Tesla proving me wrong.
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