AI

Our AI models and the methodologies used to train them may be flawed.

AI presents challenges, risks, and potentially unintended consequences.

We are increasingly utilizing AI and ML capabilities in our business operations and our product offerings.

Further, AI is constantly evolving and may not be as reliable as traditional software.

The courts and regulators have not clearly defined the scope for artificial intelligence-generated content, algorithms or trained models.

Our AI-enabled technology could be used by an end user in a manner publicly perceived as controversial.

Our use of such technologies may create dependencies on third-party AI providers.

Moreover, AI models and training approaches may contain errors or limitations.

Product demand conditions for future periods can be difficult to predict, particularly in rapidly evolving sectors such as AI infrastructure.

The regulatory framework for AI continues to evolve and is largely unsettled and fast-moving to varying extents in the jurisdictions in which we operate.

While AI adoption is likely to continue and grow, the sustainability of such elevated investments cannot be assured.

We are exposed to risks related to the use of AI tools by us and others.

In some jurisdictions, the application or interpretation of these laws and regulations is not clear, including application to agentic actions taken by AI.

Failure to successfully develop increasingly advanced technologies, including our custom AI accelerators or XPUs, network switches and other AI-related products, could impair our competitive position.

•our ability to utilize and build AI and ML capabilities into our business and incorporate AI and ML into our internal operations;

Our use of AI in our internal operations and technologies may also create new vulnerabilities or methods of attack.

Our use, or unauthorized or inappropriate use, of AI tools may also expose confidential, proprietary, personal or other sensitive information.

AI technology is evolving quickly.

•conditions or trends in the internet, other technologies including artificial intelligence, and the industry segments we operate in;

We have entered into agreements with AI clouds to enable broader access to our data center infrastructure products.

We incorporate AI capabilities across our technologies, business operations, products and services to enhance performance and drive smarter, more efficient solutions.

Further, jurisdictions are increasingly applying existing data privacy, consumer protection and other laws to AI, including emerging AI technologies such as generative AI.

Such attacks are becoming increasingly more sophisticated as threat actors leverage AI technologies.

In January 2026, South Korea's AI Basic Act took effect, introducing heightened obligations on providers and operators of “high-impact” AI systems used in critical sectors, and authority to impose suspension of AI services along with administrative fines for noncompliance.

Additionally, our increasing use of AI technologies for productivity and in our products and services may expose us to copyright infringement or other intellectual property misappropriation claims.

Employees may leave Tesla or choose other employers over Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technology, including AI, experience, or any negative publicity related to us.

The Company’s business, including its artificial intelligence and machine learning offerings, also depends on access to sufficient computing resources.

For example, our AI-native cohort, which cohort includes our largest customer, contributed high single digit percentage points to the total Company year-over-year revenue growth for the quarter ended June 30, 2026.

Data practices by us or others, AI governance, AI development and validation practices that result in controversy could also impair the acceptance of AI solutions.

•our failure to adapt our products to address the security and operational risks from AI, or to incorporate AI-driven improvements demanded by potential customers;

For example, the development and use of generative AI tools remain subject to uncertain legal frameworks, and the availability of copyright and other intellectual property protection for AI-generated material is uncertain.

The emergence of cyber-focused large language models may continue to accelerate the exploitation of vulnerabilities, and increase the frequency, speed and severity of threats.

Our use of new and emerging AI capabilities, such as AI agents, may cause unanticipated effects, which may include the disruption of our business processes and procedures or the loss of intellectual property or critical data.

U.S. regulations under the U.S. Treasury Department’s Outbound Investment Security Program impose restrictions on certain outbound investments by U.S. persons in foreign entities engaged in sensitive technologies, including semiconductors, artificial intelligence and quantum computing, and may prohibit or require notification of certain transactions, which could limit our ability to pursue or structure certain invest

•compliance with applicable foreign laws and regulations, including anti-bribery laws, privacy and data protection laws, AI laws, economic and trade sanctions, and laws relating to content and consumer protection;

•The EU's Digital Markets Act, which requires in-scope companies to obtain user consent for combining data across certain products, mandate the sharing of search data with third-party search engines, and require interoperable access to the Android operating system by third-party AI companies, among other changes; and the EU Data Act, which introduces new data portability requirements with respect to connected product

As stated more comprehensively and in context of several risk factors throughout this Item 1A., if the company does not continue to be recognized as an AI leader with strong governance processes or if our AI technologies do not work as intended or produce unexpected outcomes, IBM’s ongoing efforts to maintain and increase its market share and its profit margins, its reputation, and its competitiveness could be harmed

•impact of evolving risks related to artificial intelligence (AI), cybersecurity and data privacy across our products, operations, regulatory compliance, intellectual property, talent, and transactions;

In connection with the Xilinx, Pensando, Silo AI and ZT Systems, we recorded