[DigitalToday reporter Jinju Hong] Elon Musk said Tesla needs to more aggressively expand AI-related facility investment.

Business Insider reported on July 23 that Musk stressed on an analyst call after earnings that the company should not slow investment even if some funds are used inefficiently.

Musk said he has continued to instruct Tesla management to expand spending. "We should invest in facilities as soon as possible within limits where waste is not excessive," he said. "If you try to hit extremely high capital efficiency, you slow down." He signalled he would prioritise execution speed over cost efficiency.

Tesla’s second-quarter capital spending rose 142 percent from a year earlier to $5.8 billion. The spending expansion aligns with AI investment Musk is pushing. Tesla is putting funds into building new production lines and factories for the Cybercab robotaxi and the Optimus humanoid robot.

As a result, Tesla posted a $1.1 billion deficit in second-quarter free cash flow. It was the first time since 2024 that free cash flow turned negative, and shares fell in premarket trading as results missed market expectations.

Management indicated AI-related spending will rise further. Tesla’s full-year capital spending is expected to exceed $25 billion. Chief Financial Officer Vaibhav Taneja said the company is pursuing loan commitments to secure capacity to borrow up to $30 billion.

Tesla expects the pace of investment to accelerate further over the next 2 to 3 years. It cited plans to build a new solar panel plant, expand AI computing infrastructure and break ground on a large semiconductor plant called Terafab being pursued with SpaceX. As a result, the capital spending burden is likely to grow rather than ease in the short term.

Musk also pushed back against concerns about investment efficiency. He said Tesla’s capital spending efficiency is "so good it is difficult to measure by metrics," and that it is investing simultaneously in productive assets such as factories and infrastructure. He went on to claim it could be "the fastest industrial expansion in the United States since World War Two."

Tesla’s moves also align with the intensifying competition in AI. As big tech companies pour large sums into data centres, computing infrastructure and manufacturing facilities, Tesla is increasing spending in step with its shift beyond an automaker to a company centred on AI and robots. A key question will be how greater borrowing capacity and the speed of capital spending affect Tesla’s cash flow and profitability.