Elon Musk to build chip factory for Tesla, SpaceX and xAI

Elon Musk has announced plans to launch a large-scale chip manufacturing project called Terafab, which will be located in Austin, Texas.

The facility will be a joint project between Tesla and SpaceX, with semiconductors designed for robotics, artificial intelligence systems and space data infrastructure.

According to Musk, Terafab is aimed at delivering up to one terawatt of computing capacity per year. The first phase will involve building an advanced R&D lab in Austin, equipped for prototyping and testing a wide range of chip designs.

Musk said the current pace of semiconductor development is not sufficient for scaling his companies, making in-house production a strategic necessity.

The factory will focus on two main types of processors. One will target edge computing and data processing, critical for Tesla’s autonomous driving systems and Optimus robots. The second category will include high-performance chips designed for use in space, with SpaceX and xAI expected to be the main customers.

Tesla has already invested around $2 billion in xAI and is integrating the Grok chatbot into its vehicles. The companies are closely interconnected, with overlapping technologies and shared infrastructure.

Beyond manufacturing, Musk also outlined broader ambitions, including a future of what he described as “amazing abundance.” He referenced concepts such as launching satellites directly from the Moon and developing a lunar mass driver as part of long-term plans.

Meanwhile, the financial outlook of his companies remains strong. SpaceX is reportedly considering an IPO as early as this summer, with a potential valuation exceeding $1.75 trillion.