SpaceX plans Terafab chip megafactory with up to $119 billion in potential investment

SpaceX wants to make its own chips. Not a few of them, either.

The company, working with Tesla and Intel, is building Terafab, a vertically integrated semiconductor fabrication facility in Grimes County, Texas. Total investment across multiple phases could reach as high as $119 billion.

The first phase is smaller but still enormous. Approximately $16.8 billion was committed in August 2026.

What Terafab is supposed to do

Terafab was officially announced on March 21, 2026. The goal is to produce advanced AI and computing chips internally rather than buying them from outside suppliers.

The customer list is mostly Musk’s own companies. The chips are meant for Tesla’s Optimus robots and Cybercab vehicles. They are also intended for SpaceX’s Starlink satellites and its proposed space-based data centers.

The site is planned to span more than 100 million square feet. The Motley Fool has described Terafab as set to be bigger than any building on Earth.

The facility is projected to generate over 1 terawatt of annual AI compute capacity.

The project is expected to create between 1,800 and 3,000 permanent positions.

Texas rolled out the welcome mat

The Texas Enterprise Fund is backing the first phase with a $30 million grant.

In June 2026, local authorities approved a 100% property-tax abatement for the project.

Terafab sits on the grounds of a former power plant. It will draw industrial water from the old Gibbons Creek power plant site.

Prototype operations are underway near Tesla’s Gigafactory in Austin, Texas.

Why Musk’s companies want their own fab

Terafab fits a broader pattern. Musk’s companies have been pushing toward vertical integration, owning more of the supply chain rather than renting it.

Bringing Intel into the partnership adds manufacturing experience to the mix. SpaceX and Tesla bring the demand. Intel brings decades of knowledge about actually running fabs.

What this means

The most important figure to watch is the gap between $16.8 billion and $119 billion. The first is committed. The second is a ceiling across multiple phases that depends on future decisions.

Key milestones to watch include progress at the Austin-area prototype operations, the timing of construction in Grimes County, and whether additional phases beyond the initial $16.8 billion get formally committed. Hiring toward the 1,800 to 3,000 job target will also offer a practical read on how fast the project is actually moving.

Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.