Could Elon Musk’s $55 billion Texas ‘Terafab’ project reshape America’s semiconductor industry, as SpaceX and Tesla pursue in-house AI chip manufacturing ambitions?
Elon Musk’s SpaceX has proposed an initial investment of $55 billion to establish a semiconductor manufacturing facility in Texas, according to a public filing released on Wednesday. The project, named ‘Terafab’, is being developed jointly with Tesla and is aimed at strengthening domestic chip production in the United States (US).
According to a Reuters report, the proposed complex would include multiple phases of chip fabrication and advanced computing infrastructure. SpaceX said total investment in the project could eventually rise to $119 billion if all planned stages are completed.
The move comes as Musk increases integration between the artificial intelligence and computing operations of his companies. Earlier this year, SpaceX acquired Musk’s artificial intelligence venture xAI in a deal centred on developing space-based AI data centres. The merged entity was valued at approximately $1.25 trillion.
Terafab is planned for Grimes County, Texas, within a newly created reinvestment zone. Local officials are expected to review a proposed property tax abatement agreement during a meeting in June.
According to the filing, SpaceX intends to manufacture its own graphics processing units (GPUs) as part of the project. The company said the facility is expected to support Tesla’s autonomous driving systems, humanoid robots and AI data centres, reflecting growing computing requirements across Musk’s businesses.
Musk also stated during Tesla’s first-quarter earnings call last month that the facility would use Intel’s 14A manufacturing process for chip production, signalling collaboration with external semiconductor expertise. Intel was identified as a potential technology partner.
Analysts, however, noted that the production scale outlined by SpaceX could require substantially greater investment than is currently proposed. The filing also warned that the company remains dependent on third-party suppliers, including Samsung Electronics and TSMC, and acknowledged uncertainty over whether Terafab’s objectives can be achieved within the planned timeframe, or at all.
