SpaceX and Tesla Join Forces to Invest $17B in Terafab AI Chip Factory

SpaceX and Tesla said they want to build a semiconductor factory called Terafab in Grimes County, Texas, according to a WSJ report.

The companies said they will invest $16.8 billion in the project’s first stage. The factory would be designed to produce advanced AI chips for robots, self-driving vehicles and space-based data centers.

SpaceX, Tesla plan huge Texas chip factory

The proposed Terafab facility will cover over 100 million square feet, which would make it one of the largest industrial projects.

The factory would employ at least 3,000 people from Grimes County and Brazos County. It will make, package, and test advanced logic and memory chips. SpaceX and Tesla are basically transitioning into making their chips instead of buying outside.

Terafab will be built in Grimes County, Texas

In April, we broke ground on our research fab on the North Campus of Giga Texas – the precursor to Terafab.

Both Tesla & SpaceX will need far more chips than current & future global production can supply.

This is why we’re building… pic.twitter.com/je4jKXuQrY

— Tesla (@Tesla) August 6, 2026

Musk said the facility will help close the gap in the world’s current chip supply and the amount of computing power his companies need.

The chips will be implemented across board. For instance, it will be used for Tesla’s Optimus humanoid robots and Cybercabs. It could also be used for SpaceX’s planned AI data centers in space.

“The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying ​jobs in the Lone Star State, and enabling us to produce AI chips at scale ​for use on Earth and in space,” Musk said.

The first tranche of investment is $16.8 billion, but that figure could still go higher as the project progresses. A filing in May said SpaceX wanted to spend $55 billion on an initial phase. The total investment could hit $119 billion if all phases are done.

AI spending is already surging

The Terafab news comes at a time when SpaceX has already spent lots of money on AI. The firm reported its first quarterly results since going public in June. The revenue was slightly stronger than expected, but the spending on infrastructure was alarming.

Second-quarter revenue jumped 92% from a year earlier. However, capital spending rose more than six times to about $18.4 billion. That was more than twice the company’s quarterly revenue. Over 80% of that spending went to artificial intelligence.

The spending was also way higher than the average analyst estimate of $13.22 billion. SpaceX CFO Bret Johnsen defended the spending, saying investors should look at how fast the company can turn its AI investments into revenue.

Johnsen said the company would recover the money spent on AI computing in less than one year.

Terafab could support Musk’s bigger AI vision

Elon Musk’s companies are working on a future that would see millions of humanoid robots, autonomous vehicles and satellites operate as AI data centers.

Tesla is developing Optimus and Cybercab. SpaceX, on the other hand, is working on space data centers that would provide computing power in orbit. All of these projects need a lot of advanced chips.

The companies estimated that they could need more than one terawatt of computing power. That is way higher than the current level of available capacity, which makes access to chips a major issue for Musk’s plans.

“Both Tesla & SpaceX will need far more chips than current & future global production can supply,” Tesla said in a post.

Tesla has already started work on the project. The company broke ground in April on a research facility at the North Campus of its Giga Texas complex. That facility was done as a stepping stone toward the larger Terafab project.

Intel said it would also contribute to the project after SpaceX partnered with the chipmaker earlier this year.

Source:: SpaceX and Tesla Join Forces to Invest $17B in Terafab AI Chip Factory