• An initial phase will cost about $16.8 billion and create at least 3,000 jobs, many filled by local workers, the companies said. 
• Musk has previously called Terafab essential, adding that without it his companies simply will not have the chips they need.
• Tesla has guided for more than $25 billion in capital spending this year—roughly triple its 2025 total—while SpaceX is on pace for far higher outlays.

Tesla and SpaceX CEO Elon Musk estimates that about 25% of the AI computing power from the planned Terafab chip factory will go to Tesla’s Optimus robots, with the remaining 75% powering AI spacecraft.

Musk shared the rough split on Thursday in a post on X, hours after Tesla and SpaceX confirmed the project’s location in Texas. He also added that the complex is designed to look like “a sci-fi city.”

Giant Chip Factory Planned In Texas

Tesla and SpaceX said Terafab will be built in Grimes County, Texas, about an hour northwest of Houston. The companies call it the largest chip manufacturing facility ever planned, spanning more than 100 million square feet. An initial phase will cost about $16.8 billion and create at least 3,000 jobs, many filled by local workers. Total investment could be much higher, they added.

In April, Tesla broke ground on a smaller research facility at its Giga Texas campus near Austin. That site serves as a test bed and precursor to the full Terafab complex. Construction work at the Grimes County site is expected to begin in the coming months.

Why Build It?

Tesla and SpaceX say they will need far more AI chips than the entire global industry can currently supply or expand to produce. Terafab aims to close that gap by making more than one terawatt of computing capacity each year—enough power to run vast AI systems.

The factory will produce chips under one roof for two main uses: everyday hardware like Tesla’s humanoid Optimus robots and self-driving vehicles, plus specialized high-power chips for SpaceX’s planned data centers in space.

Musk first publicly teased the need for a “Tesla Terafab” on Tesla’s fourth-quarter earnings call in January. The project was formally announced in March.

Looking Ahead

Musk has previously called Terafab essential, arguing that without it, his companies simply will not have the chips they need. The Texas project now moves from planning into early construction.

Tesla has guided for more than $25 billion in capital spending this year—roughly triple its 2025 total—while SpaceX is on pace for far higher outlays after already spending $18.4 billion in the second quarter alone. This likely includes the initial investment in Terafab.

How Did Retail Traders React?

On Stocktwits, retail sentiment around SPCX rose from ‘neutral’ to ‘bullish’ territory over the past 24 hours, while message volume stayed at ‘extremely high’ levels.

Meanwhile, sentiment around TSLA stayed within ‘neutral’ territory, accompanied by ‘normal’ levels of retail chatter.

A Stocktwits user opined that the real test is whether they can actually finish a working chip design and start producing real silicon, not just build more factories.

Another user highlighted that SpaceX is banking big on becoming a major AI powerhouse. Earlier this month, Musk said on SpaceX’s earnings call that the company would rely exclusively on Nvidia chips to build out its AI compute.

While TSLA stock has fallen 29% year-to-date, SPCX has lost 31% since going public in June. 

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