Tesla and SpaceX to invest $16.8B in Texas chip factory 'Terafab'

Tesla and SpaceX said Thursday that “Terafab,” the advanced chip factory they are jointly developing, will be built in Grimes County, Texas, outside Houston, with an initial investment of $16.8 billion.

The factory will be “the largest and most valuable building on Earth by far,” Elon Musk, CEO of both companies, wrote in a post on Thursday. SpaceX says more than 100 million square feet of manufacturing space is planned for the facility, which the companies say will employ at least 3,000 people from Grimes and nearby Brazos County.

“The facility will be an advanced semiconductor fab that will bridge the divide between current global chip supply and the compute demand of the future,” a post on SpaceX’s website reads.

The project is driven by Musk’s vision of a future in which millions of robots take over human jobs, robotaxis handle all the driving, and satellites double as data centers for AI training and inference — a future that requires far more computing power than current production can support. SpaceX has suggested in filings that it may spend as much as $119 billion on the project across a multi-phase construction plan, though the company didn’t mention Terafab at all on its first earnings call earlier this week. Intel has said it will contribute to Terafab, though it has been vague about the exact scope of its involvement.

“Terafab will be epic in both its mission and in its sheer size, designed to build new compute at an unprecedented scale and speed,” according to SpaceX’s website, which adds that the vertically integrated factory will house the manufacturing, packaging, and testing of advanced logic and memory devices. The companies say the plant will produce chips optimized for edge computing and inference for hardware such as Tesla’s Optimus robots and self-driving Cybercabs, as well as high-power chips for operating SpaceX’s space-based data centers. SpaceX said it is committing to using water from the local Gibbons Creek Reservoir rather than local groundwater.

The announcement follows a heavily attended county meeting on Wednesday, where hundreds of residents raised concerns about the millions of dollars in tax breaks awarded to the project and about a lack of transparency. Anderson-Shiro Consolidated Independent School District Superintendent Dr. Sarah Borowicz said in a statement released by the Texas Governor’s office that the agreement would “strengthen our district, expand opportunities, and better prepare our students for their future,” adding that the district is committed to managing the opportunities it creates “wisely, transparently, and always with students at the center of every decision.”

Why it matters

Terafab shows how Musk’s AI and robotics ambitions are now driving direct bets on chip manufacturing capacity, tying two of his companies’ fortunes to a facility whose cost could ultimately dwarf the $16.8 billion initial commitment.