Terafab
A chip factory meant to out-produce most of the world’s foundries, built by two car-and-rocket companies with Intel’s help, on the site of a retired Texas power plant. Construction starts December 1.
If Optimus and Robotaxi are the products, Terafab is the supply chain Musk thinks he needs to build them at a scale nobody else will commit to. It is a joint project of Tesla and SpaceX, which makes it central to the merger talks.
What Terafab is
Terafab is a vertically integrated semiconductor plant — design, lithography, fabrication, memory, packaging and test under one roof — to make the AI inference chips Tesla's cars and Optimus robots run on and the chips SpaceX wants for AI satellites in orbit. The stated goal is more than a terawatt of AI compute per year. Terafab overview
Musk's rationale, from the launch: existing fabs could supply only about 2% of what his projects need, and “there's a maximum rate at which they're comfortable expanding.” Or, more bluntly: “We either build the Terafab, or we don't have the chips.” Electrek
Tesla and SpaceX (which owns xAI); Intel joined April 7, 2026 for manufacturing expertise and its 14A process. Samsung and TSMC are not involved.
A prototype/research fab beside Giga Texas in Austin (broke ground April 2026), and the full-scale plant at the former Gibbons Creek power station in Grimes County, north of Houston.
At launch: ~80% of chips for orbital AI satellites, ~20% for the ground — cars, robots, data centres.
On-site natural gas plus batteries (not Tesla solar); cooling water from the Gibbons Creek reservoir.
The timeline
First tease
Around Q4 earnings Musk floats a Tesla “terafab” and talks with Intel.
Launch at the Seaholm Power Plant, Austin
Streamed on X from a defunct power station: 2nm process, 100,000 wafer starts a month scaling to 1 million, 100–200 billion chips a year. Headline figure $20–25B. Musk: “the most epic chip building exercise in history by far.” CFO Taneja says it isn't in the 2026 capex plan yet.
Intel joins
Intel contributes manufacturing know-how; its 14A (1.4nm) process is planned for full scale. Tesla breaks ground on the Austin prototype fab.
The real numbers
County filings put the full plant at ~$55B initially and up to $119B across phases. Musk trims the prototype fab's expected output to “maybe a few thousand wafers per month.” Tesla runs the prototype; SpaceX leads the first full-scale phase.
“Very early stage”
SpaceX's IPO prospectus says only a framework is agreed; financial terms, IP and partner participation aren't finalised.
Tax abatement
Grimes County commissioners approve a full property-tax abatement; residents raise scale and environmental concerns.
$16.8B and a site
Tesla and SpaceX confirm Grimes County and a first-phase investment of about $16.8B; more than 100 million square feet planned, 3,000+ jobs. Musk: “the largest and most valuable building on Earth by far.”
Dates filed
Construction start December 1, 2026; completion by end of 2028.
Q3 call
Austin research fab tools commissioned in H1 2027; first functional test chip hoped for around May–June 2027; useful volume around Q3 2028; capital “in the tens of billions” through early 2028 and “north of $100 billion long term.” The Tesla/SpaceX cost split is still undetermined.
The chips: AI5, AI6 and the end of Dojo
Terafab is the long game. In the meantime Tesla's chips come from Samsung and TSMC. The AI5 — claimed at five times the compute of two AI4 chips — entered trial production at Samsung's Taylor, Texas fab on 2nm in September 2026, with yield verification by year-end and mass production in 2027; it goes into Optimus around April 2027. The AI6 is covered by a $16.5B Samsung deal signed July 28, 2025 and slipped about six months when Samsung's 2nm did. Musk has sketched designs out to AI9 on roughly nine-month cycles. Electrek
Dojo, the in-house training supercomputer announced at AI Day 2021, was shut down in August 2025; Musk called Dojo 2 “an evolutionary dead end” and its lead, Peter Bannon, left with about 20 engineers. Training now runs on Nvidia hardware at Cortex in Austin (67,000 H100-equivalents by July 2025) and, since the xAI deal, on SpaceX's Colossus clusters. TechCrunch
What the sceptics say
Electrek compared the launch to Battery Day's 4680 promises — Tesla reached roughly 2% of the original cell-volume goal — and noted that TSMC's $165B Arizona complex won't reach 2nm until 2029, that a single 50,000-wafer 2nm fab costs about $28B and takes ~38 months to build in the US, and that neither Tesla nor SpaceX has made a chip before. The tax-abatement deal reportedly requires only $5B of investment. Headline cost figures ($20B, $25B, $16.8B, $55B, $119B, “north of $100B”) describe different phases and should not be compared directly.