Tesla, SpaceX to Build $16.8B Terafab Chip Plant in Texas

Tesla and SpaceX have committed $16.8 billion to begin construction of Terafab, an AI chip factory planned for Grimes County, Texas, north of Houston. Company filings show the project was relocated from Austin and that total spending across multiple phases could reach $119 billion. Initial construction is expected to start within months.

Terafab is a joint effort by Tesla, SpaceX and xAI, the AI startup absorbed by SpaceX earlier this year. The group first announced the project in March with Austin cited as a likely site and early cost estimates of $20 billion to $25 billion. Filings filed with local authorities confirm the Grimes County location and the larger initial capital commitment.

Company documents describe a facility that will combine chip design, fabrication, packaging and testing in one complex. The planned campus would exceed 100 million square feet of manufacturing space, about ten times the size of Tesla’s Gigafactory Texas. Elon Musk described the facility as “the largest and most valuable building on Earth by far.”

Terafab’s technical goals in the filings include roughly 1 terawatt of AI compute output per year and about 1 billion full-reticle chip equivalents annually. Documents specify target chip performance at around 1 kilowatt of compute per chip, a capability the filings state does not currently exist elsewhere in the industry.

Planned products are intended for inference and edge computing across Musk’s companies. Tesla expects Terafab chips to support its Optimus humanoid robots and Cybercab autonomous vehicles. SpaceX plans higher-power chips for proposed orbital data centers and has set a target of 1 gigawatt of compute capacity in orbit by 2027. Musk has argued that space is “the only way to scale” artificial intelligence.

Intel is listed as a contributing partner to the project. Filings estimate Terafab will create at least 3,000 jobs across Grimes County and neighboring Brazos County. To limit pressure on regional groundwater, SpaceX has committed to drawing process water from the Gibbons Creek Reservoir.

Company records show SpaceX holds 18,712 bitcoins and Tesla holds 11,509 bitcoins. Neither company has disclosed whether bitcoin holdings will be used to finance Terafab, and both have historically classified their bitcoin as long-term balance sheet assets rather than funds for operating expenses.

The filings describe a multi-phase build-out that could account for the potential $119 billion final price. Officials have not provided a detailed timeline for the full project beyond the planned start of initial construction in the coming months.