Musk Launches $16.8 Billion Terafab Chip Factory in Texas
Elon Musk's SpaceX and Tesla Inc. are building Terafab, a massive semiconductor complex in Grimes County, Texas, to produce AI chips for robotics and space.
SpaceX and Tesla Inc. have announced the construction of Terafab, a vertically integrated semiconductor manufacturing complex in Grimes County, Texas. Elon Musk, CEO of both companies, is leading the project to secure a proprietary supply of AI chips for Tesla's Optimus robots and Cybercabs, as well as SpaceX's orbital data centers. The facility aims to meet a combined compute demand exceeding one terawatt, with 75% of AI compute allocated to spacecraft.
The project begins with an initial investment of $16.8 billion, though filings suggest total spending could reach $119 billion across multiple phases. The 100-million-square-foot facility will combine logic, memory, packaging, and testing under one roof. Musk described the site as potentially the largest and most valuable building on Earth, noting it would be more than five times the size of the current record-holder. Intel Corp. is partnering on the project to provide expertise in design and the 14A manufacturing process.
To ensure energy reliability, SpaceX will construct its own natural gas-fired power plants and large battery arrays. The facility will also draw water from the Gibbons Creek Reservoir to avoid depleting local groundwater. The first phase is expected to create 3,000 jobs for engineers and technicians.
Texas Governor Greg Abbott supported the project with a $30 million Texas Enterprise Fund grant. Additionally, local authorities approved a 100% property tax abatement in exchange for a $5 billion investment by 2030 and the creation of 1,800 jobs by 2035. The project has also applied for further incentives through the Texas Jobs, Energy, Technology, and Innovation program.
