SpaceX, Tesla to Spend $16.8B on Terafab Chip Factory in Texas

SpaceX and Tesla are set to begin construction of Terafab, a massive semiconductor manufacturing complex in Texas, with an initial investment of $16.8 billion.The site, which Musk claimed will be “the largest and most valuable building on Earth” in a post on X, will be built in Grimes County, Texas, outside Houston.In a post on its website, SpaceX said more than 100 million square feet of manufacturing space is planned, making it one of the largest chip manufacturing projects ever proposed.The space company positioned the facility as meeting the significant combined chip demand from itself and Tesla alone, which it estimates to be in excess of 1 terawatt (TW) of compute -- more than the current global supply.“While we are deeply appreciative of our current chip suppliers and encourage them to expand production whenever possible, this looming gulf between supply and demand is at the core of Terafab’s necessity,” the company wrote.Related:Infrastructure Startup to Build $10B AI Factory in NorwayThe plant will function as a center for developing, packaging and testing advanced logic and memory chips in one location.The chips will be used across Tesla and SpaceX’s AI projects, including processors for Tesla’s Optimus humanoid robots and driverless Cybercabs, as well as high-power chips intended for SpaceX’s planned space-based data centers.To address ongoing concerns about data center water consumption, the companies said they plan to use water from the nearby Gibbons Creek Reservoir rather than relying on local groundwater.After the initial investment, SpaceX said future expansion phases could push total funding much higher.The project marks another step toward greater vertical integration of Musk’s AI operations.SpaceX merged with Musk’s AI company xAI (which has been renamed SpaceXAI) earlier this year, bringing its AI efforts and plans for space-based data centers under the same corporate umbrella. SpaceX subsequently went public in June in what became the largest IPO in history.Intel is also expected to contribute to the Terafab project, with the company revealing its involvement in April this year. The nature and scale of its involvement, however, have not been disclosed.About the AuthorContributing WriterScarlett Evans is a freelance writer with a focus on emerging technologies and the minerals industry. Previously, she served as assistant editor at IoT World Today, where she specialized in robotics and smart city technologies. Scarlett also has a background in the mining and resources sector, with experience at Mine Australia, Mine Technology and Power Technology. She joined Informa in April 2022 before transitioning to freelance work.