Elon Musk is putting his companies' money where his mouth is in the race to develop the chips to power artificial intelligence and robotaxis.
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SpaceX and Tesla plan to invest $16.8B for the initial phase of construction on Terafab, a chip factory planned to span more than 100M SF in Grimes County, Texas, the companies announced Thursday.
The facility will employ at least 3,000 people, the announcement said, noting that many of them would be local hires from the area south of Houston.
The companies, led by the world's first trillionaire, also released a new rendering and a 53-second video showing what the massive manufacturing project would look like.
Space X previously revealed in public filings in May that it planned to build the project in Grimes County, and it said the total investment could reach up to $119B if it expands to additional phases.
Terafab is part of Musk's effort to accelerate the development of the advanced chips necessary to support AI products, robots, self-driving cars, satellites and space-based data centers. SpaceX and Tesla estimate their combined demand for chips is expected to surpass 1 terawatt of compute, equal to 1,000 gigawatts.
By comparison, JLL forecast in January that 100 GW of new data centers would be developed globally between 2026 and 2030, doubling the inventory that exists today.
A wave of new chip fab projects has moved forward across the U.S. in recent years to support the AI data center boom. Taiwan Semiconductor Manufacturing Co., a top player in the space, is investing $165B to develop new chipmaking factories in Phoenix.
The announcement from SpaceX and Tesla said they encourage other chip suppliers "to expand production whenever possible" to help fill the widening gap between supply and demand of these chips.
Terafab will house manufacturing, packaging and testing of logic and memory devices in one location to speed up the production of these chips, the announcement said.
The project represents the latest huge investment in Texas from Musk's companies. Tesla in 2021 moved its headquarters from California to its 2,500-acre production facility in Austin. And in 2024, SpaceX shifted its headquarters from California to Starbase, a hub for manufacturing its rockets near the Mexican border.
To help fuel its growth, SpaceX went public in June with a $75B initial public offering, but it received a cool reception from Wall Street as its stock dropped sharply in the weeks following the IPO.
SpaceX — which includes Musk's artificial intelligence company formerly known as xAI — revealed in its first earnings report this week that its spending skyrocketed 300% year-over-year to $28.5B in the first half of 2026. That spending, the majority going toward its AI data center build-out, caused skepticism among analysts who see it as far outpacing the company's revenue growth.
The company didn't mention the $16.8B Terafab investment on its Tuesday earnings call. Its stock jumped more than 11% Friday through midday but is still down 20% from its June IPO.
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