Musk Launches Terafab AI Chip Megafactory Project with Initial Investment of $16.8 Billion; Total Investment Could Exceed $100 Billion

SpaceX and Tesla will invest an initial $16.8 billion to build Terafab in Grimes County, Texas—an advanced AI semiconductor complex designed to secure the chip production capacity that Musk deems critical to his companies' future.

The factory aims to bridge the gap between global chip supply and the more than 1 terawatt of computing power SpaceX and Tesla are projected to need in the coming years.

In a statement on its website Thursday, SpaceX said that future expansion phases could significantly increase the total investment, adding that the plant would create at least 3,000 jobs. Musk stated:

“Terafab is bringing cutting-edge manufacturing to the U.S., creating thousands of high-paying jobs in Texas, and enabling us to mass-produce AI chips for use on Earth and in space.”

Texas Governor Greg Abbott commented, "Texas is where great ideas grow and thrive."

SpaceX shares remained stable following the lifting of trading restrictions on Thursday, rising 1.4% intraday at the time of writing.

Total Investment to Exceed $100 Billion as SpaceX Partners with Intel to Build AI Chip Megafactory

Earlier this year, SpaceX acquired Musk's startup xAI, with the deal focusing on building space data centers, and completed the largest IPO in history in June. Since then, Musk has further strengthened the integration of AI capabilities across his companies.

This vertically integrated, 100-million-square-foot Terafab facility will handle the manufacturing, packaging, and testing of advanced logic and memory chips under one roof. These chips will power Tesla's Optimus robots and Cybercab, while also producing high-power chips required for SpaceX's space data centers.

A document from May showed that SpaceX initially proposed a $55 billion investment for Terafab, with total investment rising to $119 billion if subsequent expansion phases are completed.

To advance the project, SpaceX reached a partnership with Intel earlier this year, as the latter seeks to transform its business by expanding its chip foundry operations.

Tesla had already begun construction on the research facilities at the north campus of its Giga Texas factory in April, a move seen as a precursor to Terafab.

The Grimes County site is located near the Gibbons Creek Reservoir, and the two companies plan to use water from the reservoir for industrial production rather than relying on local groundwater.

This project further expands SpaceX and Tesla's footprint in Texas, where they already have bases in Starbase, Bastrop, and McGregor.

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