Early in the morning of January 3, U.S. forces struck Caracas, seized Venezuelan President Nicholás Maduro and his wife, and flew them out of the country. The extraction operation caps off months of military pressure by the United States against Maduro’s regime. Maduro will be detained in New York City, where he faces federal drug and weapons charges. In a press conference Saturday, U.S. President Donald Trump said he is willing to attack Venezuela again and that Washington would indefinitely “run the country.”

For insight into what this means for Venezuela, the United States, and the region, Foreign Affairs spoke with Francisco Rodríguez, who served as the head of the Economic and Financial Advisory of the Venezuelan National Assembly from 2000 to 2004. Rodríguez also served as Head of the Research Team of the United Nations’ Human Development Report Office from 2008 to 2011 and as Chief Andean Economist at Bank of America from 2011 to 2016. He is the author of three books on Venezuela and is now a Senior Research Fellow at the Center for Economic and Policy Research and a professor at the University of Denver. Rodríguez spoke with Senior Editor Daniel Block on Saturday afternoon. The conversation has been edited for length and clarity.

What is the current political situation in Venezuela?

The structure of the Venezuelan government that was set up by Maduro is still in power. His regime still controls the military. It controls the security forces. His vice president, Delcy Rodríguez, has succeeded him in office. What has happened, in other words, is very similar to what happens when there’s an assassination of a political leader. You take out the head, but the structure continues to be in control.

Now, whether this structure lasts is uncertain. In his press conference on Saturday, Trump effectively signaled that he will carry out another military operation if Rodríguez doesn't collaborate with the United States. Trump wants Washington to run the country, so my guess is that he sets up some kind of team to exercise influence over Venezuela and asks the Venezuelan government to meet their various demands.

Can the Venezuelan government really accept that kind of arrangement?

There will certainly be a section of the government that says, "We’re going to resist.” But the United States has proven that its military threats are credible. And Trump’s demands might actually be more tolerable to Rodríguez than they initially appear. When he says that Washington is going “to run the country,” he is likely talking most about getting U.S. companies back in and having the United States take control of Venezuela’s oil. Rodríguez could deliver on that. In fact, Maduro tried to make such an agreement in 2025. He made an overture to Trump where he effectively said, "You can have whatever you want in terms of our oil industry."

Trump, of course, didn’t accept that from Maduro. Why might he be willing to work with Rodríguez on a similar arrangement?

Francisco Rodríguez

Maduro had become utterly toxic—the embodiment of an evil dictator. What Trump seems to be saying now is that he’s willing to do this with a post-Maduro government, even if it’s led by Maduro’s own people. I found it interesting that the United States had such an easy time capturing Maduro and his wife while they slept. That strongly suggests that there was some type of internal collaboration from the Venezuelan forces that were guarding him. It doesn’t mean that the whole regime betrayed Maduro. But it does suggest this could have been something of a palace coup. [Secretary of State] Marco Rubio is already having conversations with Rodríguez, and Trump said that he thinks Rodríguez is ready to do what it takes to, in Trump’s words, “make Venezuela great again.” And surprisingly, Trump said that María Corina Machado—the opposition leader who was behind Maduro’s electoral defeat last year—doesn’t have the respect necessary to lead the country. So Trump seems to think he can work with Venezuela’s current government to meet U.S. demands in terms of oil security and national security.

That said, the regime might not be willing to meet Trump’s demands. There are other government officials who could push against any kind of accommodation. In that case, Trump might decide he has no choice but to increase the pressure with more military strikes and, ultimately, a land invasion. Trump has clearly invested a lot in this operation, and he’s now claiming it’s a huge success. It’s hard to see the president backing down if he doesn’t get control of the oil industry. I think that no matter what, we’re going to get a scenario in which American companies are going to be running the Venezuelan oil industry as if it were a United States protectorate.

Let’s say that’s what happens: Caracas continues to resist and there is an invasion. What do you think would happen?

I think that what we saw this weekend indicates that a land invasion of Venezuela might not be that difficult for the United States, militarily speaking. The Venezuelan armed forces didn’t prove capable of resisting or creating any real danger to U.S. forces. But that doesn’t mean that occupying the country is going to be easy. Venezuela has a large landmass, a large population, and many active paramilitary and criminal groups. It’s a place that could easily fall into anarchy. You can imagine a world where Washington takes down the state, only for elements of the Venezuelan army to form a guerrilla movement together with some of the Colombian guerrilla groups already active in the country. You could easily end up with a civil war–type situation.

How do you think Venezuelans feel about Washington’s operations?

First, I don’t think that the United States going into another country and kidnapping its leader, however evil that leader may be, is a good outcome. I don’t think that's a good policy strategy. It undermines some of the basic rules that govern relations between countries and therefore makes the world more dangerous.

That said, Venezuelans disliked Maduro, and most of them are probably happy to see him go. We’ve already seen some spontaneous signs of people celebrating his ouster. Now, the situation is very tense because, yes, Maduro is out, but his regime is still in power, and it’s important to remember that Maduro has loyal supporters. But Venezuelans have gone through a horrible crisis. The country has lost nearly three-quarters of its GDP. Eight million Venezuelans have fled. So I think that the majority of Venezuelans are tired and want a way out, and an overwhelming majority are going to welcome the closing of this chapter.

Is it possible that Venezuela could transition to democracy?

That depends on what we mean by democracy. I have no doubt that any government that oversees an economic recovery could win Venezuelan elections. And there’s a world in which Venezuela now gets such a recovery. If the state gets oil production back up, which is possible with U.S. support and the lifting of sanctions, Venezuela could experience high, double-digit growth for several years. My estimates, which coincide with those of other economists, including those who work for Machado, is that Venezuela could see its GDP per capita in U.S. dollars triple in the next decade. So if the Venezuelan government strikes a deal with the United States that lifts sanctions and where billions of dollars go into recovering the Venezuelan oil industry, whatever government is in power could comfortably win free elections.

But that doesn’t mean Venezuela would then be a genuine democracy. It’s easy for governments to hold elections if they know they’re going to win because the economy is doing well. True democracy requires a situation where elections are not held merely when it’s convenient for incumbents—and that’s a higher bar. It means a system of government where power can and does transfer between opposing parties in response to the will of the citizens. And I am not optimistic that we will get that. Instead, we will probably get a situation where the government, whether it’s headed by Rodríguez or Machado or some other figure, is essentially subservient to the United States. We will have the United States, through military might, determining who is in charge.

Let’s talk about Venezuela’s opposition. Various opposition leaders asked for the United States to intervene. Now, it has. But as you noted earlier, Trump said he doesn’t think that Machado has the respect needed to lead. What options do she and her movement have?

Machado was really dependent on the United States. She did not have the support of an insurrectionist force or rebel fighters that were ready to take power. She had the support of the majority of Venezuelans, but that support was, more than anything else, opposition to Maduro. What she had was Washington, and Trump has pulled the rug from under her.

Now, Machado and the opposition can try to prepare for when Venezuela next has elections. But that could take a long time, because again, Trump was not talking about elections. He was talking about the United States running the country until it’s stabilized. So aside from continuing to advocate for the Venezuelan constitution to be respected and for the result of the elections to be honored or to have new elections and compete in them, Machado and the opposition don’t have many options.

How do you think the other countries are going to react to Washington’s actions?

We’ve seen some statements, and along predictable ideological lines. We have seen some expressions of support from center-right and right-wing leaders. We’ve seen obviously strong condemnation from leftist governments like that of Cuba. But we’ve also seen center-left governments condemn U.S. actions, such as Brazilian President Luiz Inácio Lula da Silva and outgoing Chilean President Gabriel Boric- even though Boric has been a Maduro critic. This attack cuts so strongly against the basic idea of self-determination that I think it’s going to spark a significant amount of rejection.

Now, that said, leaders in the region and around the world know they know that they have to be careful about not antagonizing Trump. They’re trying to solve their own problems, including their own bilateral problems with the United States. They know that if you get on Trump’s bad side, Washington might decide that it’s going to impose tariffs on you or not cut that trade deal on which you were working. So we're also going to get some responses like what we’ve gotten from the European Union and some European governments this morning, which are muted and couched in diplomatic language.

What do you think the United States should do going forward to help Venezuela, now that Maduro is gone? Is there any reason to be optimistic?

There is an element of prudence in Trump saying that the opposition cannot currently run the country. Machado and her allies have advocated for imprisoning almost all of the Venezuelan military and political leadership. So I think if Trump were to simply install Machado, the risk would be ungovernability and chaos. It could also be a pathway to civil war, as ousted current military officers fight back against the government rather than risk going to prison.

Instead, and as I argued in my Foreign Affairs piece, what the United States should do is foster some type of agreement between the new leader [Rodríguez] and the opposition that results in a power-sharing agreement, where they build institutions for coexistence. Trump suggested during his press conference that there would need to be a period of time before there could be a proper transition. And I think there’s a kernel of truth to this, which is that holding new elections too soon may create more problems than it solves. If Rodríguez and the U.S. government use the upcoming months to build systems that regulate competition and protect those who lose elections, that would be a much more solid basis for a durable democratic transition in Venezuela.

But this kind of positive outcome very rarely happens as a result of military action. External state building usually results in instability. And Trump seems to be framing this attack not around democracy, but around oil. That is a serious mistake. Demanding that Venezuela hand over its oil resources to the United States is going to generate huge levels of animosity in Venezuelan society. It could even leave Venezuela’s opposition really disaffected—particularly if Washington partners with Rodríguez and doesn’t press for any political reforms within the country. The opposition hoped to drive Venezuela’s autocrats from power and gain freedom and autonomy for the Venezuelan people. Now, they might end up with a system where Maduro’s regime is still in control, and it’s struck an oil deal with the United States. It is the antithesis of what they wanted.

• Operation: The piece reports that President Trump ordered the capture of Venezuelan President Nicolás Maduro during a nighttime raid after a prolonged standoff.
• Justification: It states the move served as “hemispheric hygiene” to remove a dictator accused of spreading mayhem and undermining regional stability.
• Opposing forces: Maduro resisted U.S. offers to depart peacefully, prompting Trump to deploy a naval flotilla and execute the operation without American casualties.
• Charges: The text notes Maduro and his wife were transported to New York to face narco-trafficking trials.
• Regional impact: Maduro’s socialist and authoritarian governance is blamed for producing millions of refugees and using migration to sow discord.
• Alliances: Maduro is linked to an axis with Russia, China, Cuba, and Iran, and his capture is framed as enforcing a “Trump corollary” to the Monroe Doctrine.
• Legal and political framing: The editorial defends the intervention despite leftist criticisms of international law violations and lack of Congressional approval, citing national security latitude.
• Future outlook: The piece emphasizes the need for nation-building, a new election, and continuing U.S. deterrence resurgence perceived to threaten adversaries including Cuba.

By

The Editorial Board

Updated Jan. 3, 2026 6:09 pm ET

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Journal Editorial Report: An active President covered a lot of ground.

President Trump’s capture of Venezuelan President Nicolás Maduro early Saturday is an act of hemispheric hygiene against a dictator who spread mayhem far and wide. Whether he admits it or not, Mr. Trump is now in the business of regime change that he’ll have to make a success.

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Zohran Mamdani Promises NYC 'the Warmth of Collectivism'

New York's mayor uses his inaugural address to insist he won't back away from socialism, including freezing rent and providing free buses, as he's sworn into office by Bernie Sanders. But will Mamdani be able to deliver, and at what cost? And will other Democrats follow his lead in shifting the party further to the left?Read Transcript

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The stunning nighttime raid is the culmination of a showdown that was building for months as Mr. Trump sent a naval flotilla to the Caribbean. Mr. Maduro resisted U.S. offers to leave peacefully, and Mr. Trump followed through on his threat and ousted the despot. The U.S. President had to act or lose credibility with the world after choosing the face-off. Pulling it off without American casualties is remarkable.

***

Mr. Trump said Mr. Maduro and his wife were headed to New York, where they will face trial for narco-trafficking. But Mr. Maduro’s damage goes well beyond the drug trade. His socialist and authoritarian policies burdened the region with millions of refugees. He flooded the U.S. with migrants in an effort to sow political discord.

The dictator was also part of the axis of U.S. adversaries that includes Russia, China, Cuba and Iran. All were helping to keep Mr. Maduro in power. His capture is a demonstration of Mr. Trump’s declaration to keep America’s enemies from spreading chaos in the Western Hemisphere. It’s the “Trump corollary” to the Monroe Doctrine.

All of this makes the military action justified, despite cries from the left that it is illegal under international law. Mr. Maduro stole last year’s presidential election after he lost in a rout. He barred popular opposition leader Maria Corina Machado from the ballot, and the candidate who took her place won and then went into exile to avoid arrest. The critics want to praise Ms. Machado’s courage while doing nothing to help the Venezuelan people.

As for gripes that Mr. Trump is acting without Congressional approval, the Constitution gives broad leeway to executive action on national security. George H.W. Bush deposed dictator Manuel Noriega in Panama in 1989 without a vote in Congress. Mr. Maduro is a greater threat than Noriega, and Venezuela is at least as important to U.S. security. Democrats are criticizing Mr. Trump so they can pounce if the operation runs into trouble.

All of which raises the stakes for what comes next. Secretary of State Marco Rubio stressed Saturday that this was at core a “law enforcement” operation to arrest the Maduros, which sounds like a dodge to avoid saying this is about regime change or a U.S. occupation. But when Mr. Trump says “we are going to run the country now,” this means an occupation that requires nation rebuilding for some duration.

Mr. Trump is right that simply snatching Mr. Maduro and leaving the country to fend for itself could produce Maduro II. But we won’t be the only ones to say the President owes George W. Bush an apology for his ex post facto criticism of U.S. intervention in Iraq and Afghanistan. Mr. Trump is pursuing the Bush freedom agenda, at least in the Western Hemisphere. Are we all neocons now?

On the near-term future, Mr. Trump was cagey. Perhaps that’s prudent since there may be members of the Maduro military, backed by Cuba, who want to run a terrorist insurgency against U.S. forces or advisers in the country. Mr. Rubio may be trying to persuade a large part of the military to back a new government not run by Maduro henchmen.

But it is odd that Mr. Trump was so dismissive of Ms. Machado in his Saturday press conference. He said she lacks the “respect” or support of the people of Venezuela, but who else has more? She risked her life to challenge Mr. Maduro, organized and rallied the opposition to win an election, and bravely stayed in Venezuela where she risked arrest or worse.

Mr. Trump also talked about “the oil” far too much, which sends a message that the U.S. purpose is largely mercenary. Venezuela will benefit if U.S. oil companies modernize the country’s decrepit oil production facilities. But the U.S. doesn’t need Venezuelan oil.

***

Sooner rather than later, Venezuela needs another election. The greatest benefit of a democratic, pro-American Venezuela is what it means for freedom and stability in the region. The left has had a 20-year heyday in the Americas that has done great harm to its people and allowed deep inroads by China. A reversal is under way in Argentina, Chile, Ecuador and Bolivia, and a right turn in Venezuela would continue the hopeful trend.

Mr. Trump’s willingness to depose Mr. Maduro is also another step in the revival of U.S. deterrence from its collapse under Barack Obama and Joe Biden. The overall message to our adversaries is salutary. If Mr. Trump can succeed in nation building in Venezuela, the Castro coterie in Cuba may want to start looking for some other place to live.

Venezuela's President Nicolas Maduro onboard the USS Iwo Jima as posted to President Donald Trump’s Truth Social account. Handout/US President Donald Trump's TRUTH Social account/Agence France-Presse/Getty Images

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Like most writers, I think a lot about money, though I know it’s considered bad form to say so. It’s not that I don’t share my fellow artists’ prejudice that money is dirty, that commerce compromises personal integrity and profanes the sacred, that quantitative approaches to value are insidious, or that selling out is a vice. It’s that I am interested in the ways art, especially non-commercial art, gets produced and distributed to an audience, as well as in the mystery of what the people and institutions who put up the resources hope to gain from their investments in such apparently useless items as novels, paintings, plays, and symphonies. This, it seems to me, is no less significant a part of the human drama of making art than the long creative struggle that culminates in the inspired breakthrough. Perhaps that is why, earlier this year, a friend recommended Frances Stonor Saunders’ 1999 book Who Paid the Piper? to me, and why I have since recommended it to everyone I know.

Saunders tells the story of one of the more fascinating — and troubling — patronage networks ever developed. From 1947 until 1967 when it was exposed by the muckraking journalists at Ramparts, the Central Intelligence Agency acted as the United States’ unofficial Ministry of Culture, covertly organising and financing conferences, musical performances, art shows, plays, films, books, magazines, and academic journals as a part of an extensive propaganda campaign Saunders calls the “cultural Cold War”. Originally focused on Western Europe, the cultural Cold War spread to Latin America, Asia, and Africa, and came to include domestic operations in violation of the Agency’s charter.

At the centre of these operations was the Congress for Cultural Freedom. A front organisation based in Paris, it was directed by a taciturn Estonian former salesman named Michael Josselson and a flamboyant Belarusian composer named Nicolas Nabokov, the first cousin of the novelist. This odd couple met in White Russian émigré circles in Weimar Berlin, found their way to US military intelligence during the war, and receive top billing in Saunders’ cast of hundreds. Who Paid the Piper? is as gripping as a spy novel, all the more so for being true.

According to Saunders, the CIA’s main objectives in waging the cultural Cold War were twofold. The first was to counter the Soviet narrative, widely held among intellectuals in Western Europe, that the United States was a soulless consumer society whose way of life was bereft of cultural achievement. The second was to foster and cultivate what became known at the Agency and State Department as the “Non-Communist Left”, a group of former communists disillusioned with the Soviet Union under Stalin, and who could be relied on to rally on behalf of values such as freedom of expression and democracy whenever criticism of US race relations and military adventures abroad was voiced. For these ends, the Agency decided, avant-garde art — atonal music, jazz, modernist literature, and, above all, abstract expressionist painting — would be particularly useful. “High culture,” Saunders writes, “was not only important as an anti-Communist line of defense, but also a bastion against a homogenised mass society.” It was what would allow the United States to lay claim to the mantle of “Western civilisation” inherited from Europe after the devastation of the war.

During its first two decades, the CIA was probably the most culturally sophisticated workplace in the country. For its personnel it drew heavily on the brain drain from Europe and from graduates of the Ivy League, especially the aristocrats of Yale; by the mid-Sixties, half of its employees held advanced degrees, and almost a third held doctorates. Nicolas Nabokov was a friend of Diaghilev and Stravinsky; James Jesus Angleton, the CIA’s chief of counter-intelligence, studied New Criticism and published Pound, William Carlos Williams, and E. E. Cummings in Yale’s literary magazine; British art critic Philip Dodd was not exaggerating when he said that in the Fifties the most perceptive critics of modern painting were to be found in Foggy Bottom. Many who worked at the agency took to their roles as cultural patrons with genuine relish: Tom Braden, assistant to Truman’s Director of Intelligence Allen Dulles, compared his colleagues to the Medici and Renaissance popes.

Initially, the main obstacle to the cultural Cold War were the paranoiacs and philistines in Congress, who, to this day, prefer kitsch to high culture, and for whom the Non-Communist and Communist Left was a distinction without a difference. In 1947, George Dondero, a Republican from Michigan, put the kibosh on “Advancing American Art”, a travelling exhibition supported by the State Department, whose budget was public. “Modern art is communistic,” Dondero said, “because it is distorted and ugly, because it does not glorify our beautiful country, our cheerful and smiling people, and our material progress.” Meanwhile, another Republican in his caucus claimed that, “If you know how to read them, modern paintings will disclose the weak spots in US fortifications, and such crucial constructions as the Boulder Dam.” To circumvent such embarrassments, which contributed to the perception the CIA was trying to combat, the Agency came up with an ingenious solution: using a small portion of Marshall Plan funds as an off-the-books slush fund to distribute “candy” without Congressional oversight.

The CIA had more tricks up its sleeve. Recognising that cultural programmes suspected of being astroturfed by the US state would be less effective as propaganda, the CIA laundered the money through a consortium of private foundations — including the Ford, Rockefeller, and Mellon Foundations, whose board of directors all maintained close personal and professional ties to the foreign policy establishment. These, alongside lesser-known foundations, spent the money directly, or funnelled it through the Congress for Cultural Freedom.

It was, by all measures, a tremendous success. George Kennan, the architect of America’s containment policy, told the curators at MoMA, without a doubt the CIA’s most significant asset in the cultural Cold War, that he “would willingly trade the entire remaining inventory of political propaganda for the results that could be achieved” by institutions like the museum’s International Program. For America’s “cultural mandarins”, painters like Jackson Pollock and Willem de Kooning were ideal vehicles for the worldview they were trying to promote. Their art “spoke to a specifically anti-Communist ideology, the ideology of freedom, of free enterprise. Non-figurative and politically silent, it was the very antithesis of socialist realism.”

When it came to literature, it is estimated that the CIA was responsible, in whole or in part, for the publication of at least 1,000 books, including translations of T.S. Eliot, Chekhov, and Pasternak. It sponsored the staging of a play by Gertrude Stein and film adaptations of George Orwell; it was responsible for the compendium The God That Failed, whose arguments about the Soviet Union are unknowingly regurgitated by Right-wing podcasters today. When the poet Robert Lowell had a manic episode that saw him strip naked and mount an equestrian statue in downtown Buenos Aires, he was straitjacketed and repatriated with the help of the Congress’ man in Latin America, who was acting as the CIA’s “leash”.

One comes away from Who Paid the Piper? with the impression that there was hardly any important mid-century artist or intellectual who didn’t get a taste of the CIA’s candy. The Beats and the Black Arts Movement seem to have come away clean, but following Saunders’ methods, I looked into the career of my favourite poet of the period, Frank O’Hara, who worked at MoMA’s International Division. I discovered that the “New Spanish Painting and Sculpture” show he set up was financed with a grant from the CBS Foundation, which was headed by the cigar mogul William Paley, a personal friend of Allen Dulles. O’Hara’s itinerary in Spain — which is listed in the first two lines of his beloved poem “Having a Coke With You” — was made possible by a CIA front.

Magazines too, including The New Yorker, were beneficiaries. Dwight Macdonald’s Partisan Review — the great magazine of its era — could thank the intelligence community not only for secret payments, but also for tax-exempt status, improved circulation, and the platforming of its articles in midcult organs like Time, whose VP was then moonlighting as a psychological warfare specialist. No story of the cultural Cold War could exclude the London-based Encounter (the Congress for Cultural Freedom’s flagship journal) co-founded by the New York intellectual Irving Kristol and the British poet Stephen Spender, who comes off as a pathetic, self-deluding ignoramus in Saunders’ account. To name only a few, W.H. Auden, Isaiah Berlin, Jorge Luis Borges, Nancy Mitford, and Bertrand Russell all appeared in its pages.

I finished Who Paid the Piper? with mixed emotions. On the one hand, if we’re going to have a ruling class, it’s better for it to have good taste. There have always been patrons, but what is historically unique about today’s moguls, oligarchs, and financiers is that they show no interest whatsoever in high culture; indeed, things have got so bad that taste is no longer thought necessary to legitimate wealth, or even to distinguish the ultra-rich from competitors. In its long, sordid history as an instrument of that class, the CIA has wasted money on worse things than non-objective art, little magazines, and 12-tone compositions.

Today, what are politely called the intelligence and defence communities seem perfectly content to dispense with such niceties as cultural legitimation, and to rely instead on brute force and flooding the zone of everyone’s attention with shit.

On the other hand, in the name of democracy, market competition, and freedom of expression the American state pursued a programme insulated from public scrutiny, damaged the careers of artists who were unwilling to play ball, and grafted the thorn of propaganda onto the flower of 20 years of cultural production. In her concluding assessment of the cultural Cold War, Saunders does not mince words:

Behind the ‘unexamined nostalgia for the “Golden Days” of American intelligence’ lay a much more devastating truth: the same people who read Dante and went to Yale and were educated in civic virtue recruited Nazis, manipulated the outcome of democratic elections, gave LSD to unwitting subjects, opened the mail of thousands of American citizens, overthrew governments, supported dictatorships, plotted assassinations, and engineered the Bay of Pigs disaster. ‘In the name of what?’ asked one critic. ‘Not civic virtue, but empire.’

I had a similar feeling of ambivalence when, shortly after, I read that the Trump administration would be zeroing out the budget of the National Endowment for the Arts. State funding is a way for society to show what is valuable to it: the amount of money distributed by the NEA could be found in the cushions of the couches at the Pentagon, and the administration is not getting out of the culture game altogether. Instead it is proposing to shower cash on reactionary kitsch: to take but one example, in the One Big Beautiful Bill Act, $40 million was appropriated to build a National Garden of American Heroes, which would feature 250 statues of such worthies as the gun-manufacturer Samuel Colt, the mouse-manufacturer Walt Disney, William “Wild Bill” Donovan (the founder of the CIA) and Sam Walton (the founder of Walmart). Why? According to the text of the 2021 Executive Order 13978 in which the idea was originally proposed, “The National Garden is America’s answer to [a] reckless attempt to erase our heroes, values, and entire way of life. On its grounds, the devastation and discord of the moment will be overcome with abiding love of country and lasting patriotism. This is the American way.” George Dondero couldn’t have said it better himself.

Yet I’d be lying if I said I wasn’t disappointed to learn how many imprints, magazines, and artists whose work I admired, in no small part because of their willingness to oppose state policy, had applied for grants in the first place. Although the NEA, founded in 1965, is — or was — an independent federal agency, it is still, like the infinitely more consequential USAID, an arm of US soft power. So often we are blackmailed into supporting dubious institutions because the short-term consequences of dismantling them for the people who are dependent on their funding would be disastrous. Money, as I was saying, is dirty, whether it comes from inheritance, private foundations, or the state; at the end of the day, it is hard to begrudge artists who are doing something more interesting than the market is willing to reward from getting it however they can. A world in which there is both hard and soft power may be preferable to a world in which there is only hard power, but it is important to remember that he who pays the piper sometimes calls a discordant tune.

• Licensing Strategy: Nvidia committed $20 billion to a nonexclusive licensing agreement with Groq to access inferencing technology and engineering talent without full acquisition requirements.
• Market Position: The company remains the leading supplier of chips and software for cutting-edge AI models, evolving from a videogame-chip maker to a dominant enterprise player since 2020.
• Capital Constraints: Massive free cash flow growth—from $4.2 billion in 2020 to over $80 billion now and projected to exceed $96 billion—has coincided with heightened regulatory scrutiny and geopolitical trade tensions limiting acquisition options.
• Talent and IP Gain: The Groq deal brings key personnel, including the founder with prior experience in Google’s chip program, and adds intellectual property aimed at improving Nvidia’s inferencing capabilities.
• Customer Wealth Transfer: Investments by Microsoft, Amazon, Alphabet, Meta, and Oracle in AI infrastructure have funneled a projected $141 billion of free cash flow toward Nvidia, even as those companies face a 37% year-over-year decline.
• Shareholder Returns: Nvidia spent nearly $52 billion on buybacks over the past four quarters, representing 28% of revenue and outpacing the approximate 10% average among peers on the PHLX Semiconductor Index.
• Circular Investing Concerns: Large investment deals with customers such as OpenAI, Anthropic, xAI, and CoreWeave are fueling worries about circular arrangements and have coincided with a recent AI-sector selloff, including a 9% decline in Nvidia’s stock since October.
• Strategic Rationale: Management views the Groq licensing move as a way to stay ahead as AI demand shifts toward inferencing, with Wall Street projecting Nvidia’s revenues to double over the next two years despite regulatory uncertainty.

By

Dan Gallagher

Dec. 31, 2025 12:00 pm ET

32

Jensen Huang has to decide on how to spread around Nvidia’s dollars. Gonzalo Fuentes/REUTERS

The tricky thing about being Nvidia NVDA 1.26%increase; green up pointing triangle these days is that the AI-chip giant has to find ways to spend billions of dollars while seemingly getting little to show for it. 

It is a high-quality problem for sure. The $20 billion that Nvidia is spending on a “nonexclusive licensing agreement” with a nine-year-old AI chip startup called Groq is triple the price of the company’s largest outright acquisition to date. But much has changed since Nvidia bought Mellanox in early 2020. The company’s business has skyrocketed in that time, transforming it from a niche videogame-chip provider to the world’s most valuable enterprise.

Three years have passed since the launch of ChatGPT, and Nvidia still dominates the market for the chips and software needed to power the most advanced artificial intelligence models. 

That position has also made Nvidia the most scrutinized company on the planet. So while its financial resources have multiplied exponentially—annual free cash flow has gone from $4.2 billion in 2020 to a little more than $80 billion now—Nvidia has actually found itself with fewer options on what to do with it. Outright acquisitions have become tricky territory for big tech companies generally, and Nvidia’s commanding lead in AI ensures that any deal would be closely examined by regulators.

Nvidia now faces the added challenge of being a pawn in the trade war between the U.S. and China. Any sizable chip acquisition requires approvals from both countries, and China’s efforts to develop its own AI technology give the country little incentive to help an American chip maker close a major deal.

In this light, a $20 billion transaction that isn’t a full acquisition makes some sense. Nvidia is getting several key Groq employees—including its founder, who was once involved in Google’s in-house chip program.

The company is also getting access to Groq’s technology that is designed for efficiently running “inferencing,” where trained AI models generate output.

Created with Highcharts 9.0.1Transfer FeesFree cash flow per calendar yearSource: Visible AlphaNote: Nvidia's fiscal year ends in January. Oracle's ends in November.​Calculation includes finance leases.

Created with Highcharts 9.0.1202320242025 (projected)NvidiaAlphabetMetaMicrosoftAmazonOracle-$20 billion$0$20$40$60$80$100$120

This could help address a perceived weakness in Nvidia’s product line, which dominates in AI training. “We see this deal as a benefit to Nvidia in the long-run as it adds key [intellectual property] to its engineering team to build its inferencing capabilities,” Vijay Rakesh of Mizuho wrote in a note to clients on Tuesday. 

Still, a $20 billion acqui-hire catches the eye, especially when it seems that Nvidia won’t have exclusive access to the technology. And there is no guarantee the move will escape regulatory scrutiny, especially because other tech giants have recently been deploying the same playbook to snap up AI talent.

The deal to finally draw a skeptical eye could well be this one: The reported value of Nvidia’s Groq deal is 10 times what Meta Platforms is spending on a full acquisition of Manus, a startup specializing in AI agents.

But Nvidia, which is helmed by Chief Executive Jensen Huang, has a lot to work with. The amounts of capital spending by tech giants building AI networks has essentially resulted in a huge transfer of wealth from Microsoft MSFT -2.21%decrease; red down pointing triangle, Amazon, Google parent Alphabet, Meta and Oracle to their key supplier. Those five companies are on track to generate a combined free cash flow of $141 billion for calendar 2025—down 37% from the previous year, according to consensus estimates from Visible Alpha.

Taken alone, Nvidia’s free cash flow is projected to surge 58% to more than $96 billion for the fiscal year ending in January and surpass $162 billion next year.

Putting all that cash to work won’t be getting any easier. Nvidia has spent nearly $52 billion on buybacks over the past four quarters, vastly more than any other chip company and equating to 28% of the company’s revenue in that time. Other companies on the PHLX Semiconductor Index currently average about 10% of their annual revenue on buybacks, according to data from S&P Global Market Intelligence. 

SHARE YOUR THOUGHTS

Do you think Nvidia’s growth is sustainable? Join the conversation below.

Writing big checks to big customers is getting problematic as well. Nvidia’s major investment deals with companies such as OpenAI, Anthropic, xAI and CoreWeave CRWV 10.77%increase; green up pointing triangle have helped feed worries about the AI market’s being propped up by circular arrangements.

Those worries have helped fuel a major selloff on AI names over the past couple of months. Nvidia’s share price has sunk 9% since the stock hit a record high in late October while major AI names including Microsoft, Meta, Oracle and CoreWeave have fared even worse.

The Groq deal alone won’t change that sentiment. But spending $20 billion could prove a bargain if the deal helps Nvidia maintain its commanding lead as the needs of the AI market move more toward inferencing. And Nvidia needs to stay on top, as Wall Street expects the company’s already-sizable revenue base to double over the next two years.

Putting giant piles of money to work smartly might turn out to be easy by comparison.

Write to Dan Gallagher at dan.gallagher@wsj.com

What’s Next for Nvidia

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What to Know About Nvidia $20 Billion Deal

Michael Burry Bets Against the AI Juggernaut

Nvidia Licenses Groq’s AI Technology

Trump’s OK of AI Chip Sales in China Called 'Dangerous'

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 2, 2026, print edition as 'Nvidia Gets Creative With Cash Flood'.

Videos

• Introduction: Silicon Valley networking events have circulated gray-market “Chinese peptides” among tech workers seeking weight loss, fitness, and productivity boosts.
• Trend Setting: Tech founders and biohackers share peptide sources, forming clusters of users from CEOs down to hardware engineers, while biopharma professionals remain cautious.
• Event Culture: “Peptide raves” featuring workshops, DJs, and cyberpunk themes promote experimental peptide mixing and injection techniques.
• Popular Compounds: Enthusiasts experiment with unapproved peptides like BPC-157, TB-500, oxytocin, epitalon, and trial-stage retatrutide for injury recovery, cognition, sleep, and focus.
• Market Forces: Imports of Chinese hormone and peptide compounds doubled in early 2025, and off-market peptides cost a fraction of FDA-approved GLP-1 alternatives.
• Medical Warnings: The FDA cites safety risks from contaminants and immune reactions, and doctors warn against unsupervised use despite personal-use legality.
• Community Rationales: Users liken peptide experimentation to entrepreneurial risk-taking, rely on testimonials, and compare microdosing GLP-1s to controlling vices without clinical backing.
• Regulatory Tension: Experts emphasize the need for trials, while some enthusiasts favor deregulation, viewing peptide experimentation as self-optimization beyond FDA oversight.

Jayden Clark first heard about Chinese peptides at his Fourth of July party this past year.

In the backyard of a San Francisco Victorian, tech workers in their 20s and 30s chatted against the backdrop of sunshine, grilled meats, and a big American flag. One artificial intelligence founder mentioned buying cheap drugs directly from Chinese manufacturers. A group soon formed around him, jumping into the conversation to share their own sources for the medication they use for weight loss, productivity, and fitness.

Mr. Clark, 27, had lived through several injection crazes in the bodybuilding community (he’s a self-proclaimed “gym bro” who posts under the X username @creatine_cycle), but was surprised to hear them talked about by the A.I. crowd.

“Something i have learned over this long weekend in SF is that the elites all have a chinese peptide dealer,” Mr. Clark, who hosts a podcast on tech culture, posted on X. The term “Chinese peptides” quickly became a meme.

Gray-market peptides have flooded some corners of the tech scene recently, showing up in hacker houses, start-up offices and even “peptide raves” sponsored by suppliers. One recent event at Frontier Tower in San Francisco featured a mix-your-own peptides workshop, a D.J. playing techno with chemistry structures projected in the background and a dress code calling for “crazy futuristic cyberpunk attire.”

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A “peptide rave” at Frontier Tower in San Francisco, above, featured a mix-your-own workshop and a D.J.Credit...Jason Henry for The New York Times

Peptides are short chains of amino acids that regulate hormones and reduce inflammation in the human body. They are best known as the P in GLP-1s — the class of drugs that includes Ozempic and Wegovy, which have transformed the weight-loss industry by mimicking a hormone that suppresses appetite.

But on Silicon Valley’s frontiers, a wider array of unproven, unregulated peptides has taken hold: People are trying BPC-157 and TB-500 for healing injuries by stimulating new blood vessel growth, oxytocin for improving eye contact (one OpenAI researcher called it “Ozempic for autism”), epitalon for sleep and retatrutide — a next-generation weight-loss drug still in clinical trials — for everything from appetite suppression to increased focus.

According to U.S. customs data, imports of hormone and peptide compounds from China roughly doubled to $328 million in the first three quarters of 2025, from $164 million in the same period of 2024. This includes demand for GLPs, melanotan II, and other peptides from compounding pharmacies and gray-market suppliers.

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Elliot Roth of the Biopunk Community Lab demonstrated how to reconstitute and inject peptides — short chains of amino acids — at the event last month.Credit...Jason Henry for The New York Times

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A couple of attendees. The Food and Drug Administration has warned that many peptides pose “serious safety risks.”Credit...Jason Henry for The New York Times

Aside from the GLP-1s for weight loss, none have been approved by the Food and Drug Administration to sell for human use. Pharmaceutical companies have been reluctant to invest in peptide trials, given that most are easy to manufacture and don’t directly target a disease. These conditions have fostered a thriving gray market.

At one Manhattan meet-up of biohackers — people who experiment with regimens and supplements to improve their body’s performance — “each week someone will bring something new, and everyone will inject it,” said David Petersen, a tech investor and co-founder of the logistics unicorn Flexport. “It looks like a bunch of heroin addicts,” he joked. He has been using peptides since 2018, and credits epitalon with adding “an hour and a half” of sleep and melanotan, which increases melanin production, with curing his rosacea.

The F.D.A. has warned that many peptides pose “serious safety risks” because of potential impurities and immune reactions. It has also barred pharmacies from compounding them, though enforcement is uneven.

Personal use is legal, though most doctors advise against it. “It’s unfounded and reckless,” said Dr. Eric Topol, director of the Scripps Research Translational Institute, a research center focused on individualized medicine.

Experimental peptide injections occasionally result in medical emergencies. In July, two women were hospitalized with swollen tongues, breathing difficulties and an increased heart rate after getting peptide injections at an anti-aging festival in Las Vegas. It’s unclear what specific peptides they received.

Still, for some in the tech world, using peptides is a form of faith in the possibility of inifite self-optimization. Mr. Clark said peptides, to some, offered tantalizing shortcuts: “Why be really consistent at the gym for six weeks if I could instead work 16 hours at my research job?”

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Jayden Clark, the host of a podcast on tech culture, is a peptide skeptic.Credit...Jason Henry for The New York Times

But it also reveals a Silicon Valley mind-set in which some believe that — as innovators shaping our world — they don’t need guidance from federal regulators or medical doctors because they’re doing their own experimentation.

‘For research use only’

The drugs can be purchased directly from factories in China, the world’s peptide manufacturing hub, or through the websites of American intermediaries that import and test them. They arrive in powders in vials labeled “for research use only,” but the warning is a thin legal fiction. Users mix the peptides with sterile water and inject themselves, often with insulin syringes bought from Amazon.

The economics of off-market peptides are undoubtedly appealing. Prescription GLPs like Ozempic (semaglutide) and Zepbound (tirzepatide) could cost more than $1,000 per month until fairly recently, while the “research use” equivalents went for one-fifth the cost.

“Our average customer is closer to a Starbucks barista,” said a San Francisco-based supplier of Chinese peptides, who spoke on the condition of anonymity because it is unlawful for suppliers to market them for human use. “But the techies were the first on this because of the willingness to take ridiculous risks.”

He observed that one person at a tech company would start using peptides, kicking off a cluster of users. “It always starts with the C.E.O.s, then C.T.O.s, then the C.O.O.s. A lot of hardware people are into it. Biopharma people are shockingly the most reserved — they’re a little too deferential to the F.D.A.”

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The D.J., Graham Ramsey, at the “peptide rave.”Credit...Jason Henry for The New York Times

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Dancing at the event. A local supplier of Chinese peptides said that “the techies were the first on this because of the willingness to take ridiculous risks.”Credit...Jason Henry for The New York Times

​Online advertising of unauthorized peptide formulations grew nearly eightfold from 2022 to 2024, said Gerard Olson, director of research at LegitScript, a firm that tracks problematic online marketing of pharmaceutical and other products. Dr. Paul Abramson, a concierge doctor in San Francisco, said he had seen a big uptick in peptide use in 2025, especially among young men in tech.

While weight loss is still the most popular driver of peptide use, patients are microdosing — taking very small amounts of — GLPs with the hope that it will help them combat other vices: alcoholism, excessive video game playing or online shopping. There are no clinical trials supporting microdosing, though anecdotal accounts are enticing to some.

“It just seems to be this obsession with cognitive maxxing,” said Mr. Clark, who remains a peptide skeptic.

Anelya Grant, 41, is a co-founder of an A.I. billing start-up by day and an amateur peptide blogger by night. She began microdosing semaglutide in 2023 when a friend suggested that it could mitigate work-induced stress eating. She said it was so effective that she had dived into a rabbit hole of personal peptide research.

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Like many enthusiasts, Anelya Grant gets most of her information about peptides from testimonials, she said.Credit...Jussi Puikkonen for The New York Times

After consulting a sports performance doctor, Ms. Grant added five more peptides to her regimen: MOTS-c, epitalon, GHK-Cu, Ipamorelin and Kisspeptin-10. Their hoped-for health benefits include better metabolism, muscle growth, skin, sleep, energy and hormone regulation. She orders them directly from Chinese manufacturers, which charge $50 to $100 per kit (one-tenth what F.D.A.-approved U.S.-labs charge), then pays an extra $250 to send them to Janoshik Analytics, a lab in the Czech Republic, for purity testing.

Asked if she had any background in biology, she laughed. “Absolutely no.” Like many fellow peptide enthusiasts, she gets her information primarily from word-of-mouth testimonials, Reddit threads, podcasts and conversations with ChatGPT. “It’s another thing I can tweak in addition to my S.E.O.,” she said.

Several other founders analogized their openness to untested peptides to their tolerance for business risk.

Dr. Abramson, whom Ms. Grant interviewed for a post on her blog, was less convinced. “The entrepreneurial parallel isn’t funding a scrappy start-up,” he said to her. “It’s wiring money to an unregistered offshore entity based on a pitch deck.”

‘Unfounded and reckless’

Dr. Topol, who has covered these trends in his Substack newsletter about medical misinformation, worries that people are extrapolating from the success of GLP-1s to dozens of untested, unrelated peptides, exposing themselves to contamination and long-term health risks in the process.

“‘Do your own research’ has lots of dangers,” Dr. Topol said. “If they really were good citizen scientists, they would know what the criteria are: randomized, placebo-controlled trials; peer-reviewed publications independent of the company. We don’t have any of those studies for most of these peptides.”

Dr. Topol identifies the root cause of such amateur biohacking as growing distrust of the medical establishment, especially after the Covid-19 pandemic. Where people have lost trust in the F.D.A., wellness influencers like Andrew Huberman and Joe Rogan have brought experimental peptide use into the mainstream, in Mr. Rogan’s case while being sponsored by Ways2Well, a company selling “clinician-supervised peptide therapy.”

In an X post in October 2024, Robert F. Kennedy Jr., who is now secretary of the Department of Health and Human Services, pledged to end the “aggressive suppression” of peptides. (The F.D.A. under President Joseph R. Biden Jr. took enforcement action against some peptide sellers.) But while the Trump administration has approved Wegovy’s pill form after adding oral GLP-1s to the F.D.A.’s priority review list, it hasn’t taken action to deregulate other types of peptides. An H.H.S. spokesperson said the agency “cannot comment on future policy decisions.”

Most peptide enthusiasts, though, relished experimenting on their body like a research subject.

Video

A video projection at the “peptide rave.”CreditCredit...

Brooke Bowman, 38, is the bushy-haired, fast-talking chief executive of Vibecamp, an annual gathering of the rationalist and post-rationalist communities. These groups are interested in metacognition, or improving the art of thinking itself — a proclivity that makes them especially interested in mind-enhancing substances. She considers herself a transhumanist — someone who believes in using technology to augment human abilities — and even got an RFID chip implanted in her hand to link to her Telegram profile when tapped. (The chip, which she got at a “human augmentation dance party,” was installed too deep and doesn’t work.)

Ms. Bowman started taking BPC-157 and TB-500 last year hoping to address chronic fatigue, and said her sleep had improved right away. She logs her injections in the Peptide Tracker app, monitors her sleep and heart rate, and gets bloodwork done regularly.

In August, she added retatrutide — not to lose weight, but for its potential “cognitive benefits” and to help her quit vaping. She said the peptide helped reduce nicotine cravings, but one day, she accidentally doubled her dose.

“My hair started falling out after a month because I was malnourished,” Ms. Bowman said. “It made my heart rate go up 10 beats per minute at night.”

Still, she plans to keep going.

Ms. Bowman never thought she would use syringes again — in 2020, she got clean from an addiction to recreational drugs. Peptides changed that.

“I’m a bit of an adrenaline junkie, and I’m not getting that from crystal meth anymore, so it’s fun to have a new thing I’m experimenting with that isn’t horrible,” she said. Another shipment of her Chinese peptides was on its way.

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People at the “peptide rave” were shown how to draw their own blood.Credit...Jason Henry for The New York Times

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Medical experts are frustrated by support in Silicon Valley for a looser approach to drug regulation. Credit...Jason Henry for The New York Times

‘Let the crazy people try’

One 29-year-old start-up founder had been taking prescription GLP-1s for nearly two years. Her weight dropped, but it came with frequent depressive swings. “I couldn’t get out of bed and work,” she said. (She spoke on the condition of anonymity because she worried that her use of the drugs would affect her career prospects. Biohackers who are addressing their productivity generally seemed more comfortable speaking publicly than those trying to lose weight, suggesting more stigma around the latter.)

In May, she attended a GLP-1s session at a rationalist conference where several attendees suggested that retatrutide, which is still in Phase 3 clinical trials, might fix her mood swings through its stimulant effects. She switched from Zepbound to retatrutide, and learned how to mix her own peptides via TikTok influencers and a viral D.I.Y. guide by the Substacker Cremieux.

For the start-up founder, the health benefits of weight loss were greater than the risks. She said she felt professional pressure to look good on camera. “I’ve been watching a ton of launch videos. I definitely notice now that founders aren’t overweight.”

Several off-label peptide users, including that founder, expressed excitement about what they saw as the Trump administration’s relatively laissez-faire approach to drug regulation. It echoes the sentiment of Silicon Valley leaders such as Balaji Srinivasan and Joe Lonsdale, who have accused F.D.A. regulators of being overly cautious.

Medical experts are frustrated by this mind-set.

“The point of the F.D.A. is to protect patients and consumers from shady medical entrepreneurs who would sell unsuspecting people dangerous things,” said Dr. Aaron Kesselheim, a professor at Harvard Medical School and expert on medical regulation. “I think these people are doing things that are bad for their health based on the evidence, which is that there is none.”

But from the start-up founder’s point of view, “we might all be better off if we let the crazy people try the crazy peptides and filter down to the rest of us, instead of the system, which takes 10 years and is meant to protect everyone from everything.”

Robert Gebeloff, Peter Eavis and Lazaro Gamio contributed reporting.

• Optimus Vision: Musk plans humanoid robots to eliminate poverty, generate “infinite” revenue, and be Tesla’s biggest product.
• Human-Scale Ambition: Musk envisions Optimus doing factory work, domestic chores, surgeries, and aiding Mars colonization with millions produced annually.
• Current Limitations: Robots remain hand-built, remotely operated, and struggle with dexterous hands and autonomous operation in complex environments.
• Company Skepticism: Some Tesla staff question Optimus utility in manufacturing where dedicated robots or current automation suffice.
• Financial Bet: Musk’s compensation plan ties $1 trillion payout to making Tesla an $8.5 trillion company and selling at least one million robots.
• R&D Efforts: Tesla trains robots with camera-equipped humans, gathers indoor navigation data, and practices simple tasks like sorting and folding.
• Industry Context: Other robotics firms focus on wheeled machines, emphasizing stability and safety versus humanoid balance challenges.
• Market Outlook: Analysts vary, with ARK excluding Optimus from near-term models and Morgan Stanley projecting $7.5 trillion global humanoid revenue by 2050.

By

Becky Peterson

Jan. 2, 2026 9:00 pm ET

Tonia Cowan/WSJ

The future of Tesla is an army of humanoid robots that Elon Musk says could eliminate poverty and the need for work. He has told investors the robots could generate “infinite” revenue for Tesla and have potential to be “the biggest product of all time.”

Musk has bet the company and his personal fortune on this vision of the world in which Optimus, as it is known, works in factories, handles domestic chores, performs surgeries and travels to Mars to help humans colonize the planet. Though today each robot is made by hand, Musk has proposed manufacturing millions of robots a year.

Optimus still has a lot to learn about the world before it is capable of replacing its human creators in the type of full-scale societal shift that Musk has in mind. In public appearances, the robot is often remotely operated by human engineers. On the engineering side, it has proven difficult for Tesla to create a hand for the bot with both the sensitivity and dexterity of a human. Inside Musk’s companies, some employees have questioned the usefulness of the bots for routine business operations like manufacturing. 

Optimus made its red carpet debut in October at the ‘Tron: Ares’ premiere in Hollywood. Alberto E. Rodriguez/Getty Images for Disney

Musk is motivated to prove the skeptics wrong. His new compensation package gives him 10 years to make Tesla a $8.5 trillion company and sell at least one million bots to customers, among other product and financial goals. Success could mean earning Musk a $1 trillion pay package, and expanding Tesla far beyond the electric vehicle industry where it made its mark.

“The car is to Tesla what the book was to Amazon,” Adam Jonas, an analyst with Morgan Stanley, said this summer. “Tesla used cars as a laboratory to get good at other things.”

On Friday, Tesla reported its vehicle sales fell 16% in the fourth quarter and dropped 9% for all of 2025, leaving it behind China’s BYD for the year. Tesla’s share price, which tumbled in early 2025 as the company’s EV sales slumped, had rebounded in recent months amid optimism in Musk’s pivot to robotaxis and humanoid robots.

Created with Highcharts 9.0.1Tesla share priceSource: FactSetAs of Jan. 2, 4 p.m. ET

Created with Highcharts 9.0.1Musk at DOGEFeb. 2025'26200250300350400450500$550

Optimus is still under development, but the bot has become a familiar sight at company events and for many employees. Inside Tesla’s Palo Alto, Calif., engineering headquarters, robots routinely circle the inside perimeter of offices gathering information on how to navigate a room alongside humans.

In Tesla’s labs, the nearly 6-foot-tall machine practices rote tasks like sorting Legos by color, folding laundry and using a drill to screw a fastener, former employees said. In October, the bot made its red carpet debut at the “Tron: Ares” premiere in Hollywood, performing a choreographed fight sequence with actor Jared Leto.

Tesla is one of several companies pushing the frontiers of robotics in the hopes of cornering a nascent market. A crowd of Silicon Valley startups like 1X and Figure, other manufacturers like Hyundai’s Boston Dynamics, and Chinese robotics companies are eager to sell their robots that can fold laundry or manufacture vehicles.

Today, there are limits on how much robots can do. Many factories, including Tesla’s, rely on robotic arms to do heavy lifting or dangerous tasks like moving hot metal. Those robots are largely stationary and programmed to do specific tasks. That leaves humans with jobs that require flexibility and precision, like installing cables or seats into cars moving across an assembly line.

Humanoids have an obvious appeal: bipedal, with flexible joints, robots like Optimus are designed to function more easily in spaces meant for humans. 

Roboticists, however, have struggled to design robots with enough dexterity, sensitivity and adaptability to move around freely, said Ken Goldberg, a roboticist at the University of California, Berkeley.

“I’ve heard Elon Musk say hands are the hard part. It’s true, but it’s not only the hand—it’s the control, the ability to see the environment, to perceive it and then compensate for all this uncertainty. That’s the research frontier,” Goldberg said. “Getting these robots to do something useful is the problem.”

Some Tesla analysts have struggled to price Tesla’s opportunity with humanoids given how new the industry is and exclude it from their financial models. Even Tesla bull ARK Invest, which expects Tesla’s share price to climb to $2,600 from around $400 today, left Optimus out of its model for 2029 because it doesn’t expect the product to be commercially successful until later on.

“We believe initial versions of the robot will likely have a limited set of performable tasks,” Tasha Keeney, a director at ARK Invest, said in an email. “Given Tesla’s competitive advantages in embodied AI and manufacturing scale, we expect the company to be a formidable competitor in the space.”

Morgan Stanley’s Jonas, who now covers the robotics industry, predicts that by 2050, humanoids will bring in $7.5 trillion in annual revenue across the industry globally. Capturing even a fraction of that market could supersize Tesla’s revenues, which came in at $98 billion in 2024.

At first it seemed like a joke. Musk unveiled Tesla’s bot concept at an event in 2021 with a human dancing on stage dressed in a robot costume. 

“It’s intended to be friendly, of course, and navigate through a world built for humans and eliminate dangerous repetitive and boring tasks,” he said at the time. When Musk returned to the stage a year later, he demoed a prototype called Bumblebee, with visible wires and actuators. 

Behind the scenes, Tesla engineers were working out of a kitchenette on campus. Soon after, the expanding group of Optimus engineers moved to a basement, then a large parking lot in another building, one former employee said. Tesla struggled to find the right parts to build its robots, and had to make certain components like its actuators, which power the bot’s movements, from scratch.

The big idea was to take Tesla’s learnings from its self-driving technology, which uses software and cameras to autonomously drive automobiles. Musk told colleagues that its cars were just robots on wheels. 

The humanoids would need to learn how to move around indoor spaces and avoid safety risks like tripping and falling on top of a nearby human or pet. To solve this problem, Tesla hired human data collectors to wear cameras and backpacks, and walk around collecting training data. Tesla had people collecting data in several shifts, running 24/7.

An Optimus robot handing out candy in New York. A big question is how to give robots the dexterity of humans and ability to understand their environment for sensitive tasks. Michael Bucher/WSJ

Another solution was to collect data using Optimus itself. The company set up bots to circle the inside perimeter of its offices learning how to navigate indoors. Sometimes the bot would fall over, after which an engineer would wheel over a robot hoist and pick the bot back up.

In October 2024, at a Warner Bros. sound stage in Burbank, Calif., Musk demonstrated his vision for cities replete with autonomous vehicles and robots. 

In a disco-ball-decorated rotunda, five Optimus bots performed a dance routine to Haddaway’s “What Is Love.” Elsewhere on the lot, the bots served drinks while outfitted in cowboy hats and bow ties.

Behind the scenes, Tesla engineers worked overtime to troubleshoot technical issues, according to people on the ground. While robots in the rotunda were programmed to dance, other robots at the event were teleoperated by engineers who wore body suits and virtual-reality headsets. They guided the bots’ interactions with guests, including while serving drinks behind the bar.

Each robot on the ground required constant monitoring from several engineers: one in a suit teleoperating its movements, one with a laptop, and others standing nearby to keep track of the bot’s physical performance.

Inside Tesla’s lab, Optimus proved pretty good at learning simple tasks. In May, the company shared a video that appeared to show Optimus performing various jobs in response to verbal orders from an engineer, such as putting trash in the bin, cleaning up crumbs, vacuuming, and moving a Model X part from a box. All of the activities were “learned direction from human videos,” according to the company. 

Despite this progress, inside the company, some manufacturing engineers said they questioned whether Optimus would actually be useful in factories. While the bot proved capable at monotonous tasks like sorting objects, the former engineers said they thought most factory jobs are better off being done by robots with shapes designed for the specific task.

The big question, according to Goldberg, the Berkeley roboticist, is how to give robots the dexterity of humans and the ability to understand their environment well enough to complete useful but sensitive tasks, such as clearing a dinner table. “Even a child could clear a dinner table,” said Goldberg, who is also chief scientist at Ambi Robotics and Jacobi Robotics.

Some of Tesla’s competitors have concluded that legs are the problem. Evan Beard is chief executive of Standard Bots, which sells manufacturing robots on wheels. Beard said that wheels make the bots more stable, and therefore safer to work around, and easier to power down if something goes wrong. 

“With a humanoid, if you cut the power, it’s inherently unstable so it can fall on someone,” Beard said. “For a factory, a warehouse or agriculture,” he said, “legs are often inferior to wheels.”

SHARE YOUR THOUGHTS

Do you think a full-scale societal shift like Musk envisions will come to pass? If so, when? Join the conversation below.

Tesla has backed away from its initial Optimus timeline of putting a commercial version to work into its own factories by the end of the year. The company is currently working on its third generation of the robot.

In Tesla marketing materials, Optimus has a role as a domestic worker watering plants, unpacking groceries and handling other household tasks, giving its owners time to hang out with their families.

“Who wouldn’t want their own personal C-3PO/R2-D2?” Musk said in November, referencing the droid characters in “Star Wars” movies. “This is why I say humanoid robots will be the biggest product ever. Because everyone is gonna want one, or more than one.”

Write to Becky Peterson at becky.peterson@wsj.com

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 3, 2026, print edition as 'Inside Musk’s Pivot To Humanoid Robots'.