Goldman Sachs lowered its price target on Tesla following the company’s fourth-quarter earnings, citing expectations for negative free cash flow in 2026 as the automaker ramps up capital expenditures to fund its artificial intelligence ambitions.
Analyst Mark Delaney maintained a Neutral rating on the stock, noting that Tesla‘s planned CapEx increase to more than $20 billion this year will pressure cash flows even as the company makes progress on autonomous driving and robotics.
The company’s CapEx reached a new record in 2024 at $11.3 billion, then declined to $8.5 billion in 2025. The 2026 forecast represents more than double what it was last year.
“We now expect negative overall FCF [Free Cash Flow] this year for Tesla,” Delaney wrote in a note released after the results.
The Elon Musk-led company announced that it will invest approximately $2 billion in xAI, the OpenAI rival led by Tesla‘s chief.
The new price target, which was lowered to $405 from $420, implies a downside of 6.1% based on Wednesday’s closing price of $431.46.
In the after-hours session — while Musk and the company’s management were commenting on the results — the stock rose nearly 2% to just below $440.
AI Focus Intensifies
Delaney said Tesla‘s implied valuation has long been tied to future profits from AI-related efforts including Full Self-Driving, robotaxis, and robotics, adding that success in these areas will be even more critical given the company’s investment plans.
“While a large part of Tesla‘s implied valuation has long been tied to future profits associated with its AI related efforts, we believe success in these areas will be even more in focus going forward given the company’s planned increase in capex,” the analyst wrote.
Musk announced in the conference call that it will stop producing its pioneering vehicles Model S and Model X in the second quarter and convert the space over time for Optimus humanoid robot manufacturing.
Tesla sold 1.585 million Model 3 and Model Y vehicles in 2025, accounting for 96.9% of total deliveries.
The remaining 3.1% came from other models including Model S, Model X, and Cybertruck.
FSD Progress
Goldman acknowledged progress on Tesla‘s autonomous driving technology, particularly with FSD Supervised version 14.
“We continue to believe Tesla is making progress in its AI related efforts, especially with FSD (Supervised) v14 where some users have reported driving multiple thousands of miles between critical intervention on X and FSD v14 getting several positive reviews,” Delaney wrote.
Tesla stated that a limited number of robotaxis are now operating commercially in Austin without a safety monitor or trail car, and CEO Elon Musk recently said the company plans to ship its Optimus humanoid robot to external customers starting in 2027.
Competition Concerns
Despite Tesla‘s competitive strengths in data access, engineering capabilities, and vertical integration, Goldman expects competition to moderate profit growth.
“We also expect competition to moderate the degree of profit growth,” Delaney wrote before citing both Waymo and the world’s largest company and Tesla supplier Nvidia.
“For example, Waymo plans to more than double its locations this year from the 5 cities it was operating in exiting 2025, and Nvidia announced plans at CES to open source its Alpamayo model and tools.”
The analyst also flagged that Tesla faces intense competition internationally in EVs, especially from Chinese automakers expanding beyond their home market.
BYD, which surpassed Tesla in global sales of fully electric vehicles for the first time in 2025, plans to deliver 1.3 million units outside China this year — up 24% from 2025.
“We see that degree of growth as reflected in the stock and maintain our Neutral rating,” Delaney wrote.
