SpaceX considers $119 billion 'Terafab' chip factory in Texas

SpaceX is considering building a semiconductor factory in Grimes County, Texas, according to a proposal published on the county website. The project, dubbed “Terafab,” represents a large capital outlay for the space exploration company as it seeks to secure its hardware supply chain. According to a filing, the estimated costs for the project are structured as follows:

• Initial investment: SpaceX is considering spending $55 billion, at least initially, to build the facility.
• Total project cost: The company estimates it may spend up to $119 billion in total on the project.

The Terafab semiconductor factory project involves Tesla contributing resources. The companies have also involved chipmaking partner Intel in the effort. Together, they aim to develop chips for AI servers, satellites, data centers, and autonomous vehicles. Sometime in the future, the facility will manufacture enough chips to provide 1 terawatt of power per year, according to Elon Musk. Musk, the billionaire founder of SpaceX, Tesla, and xAI, has argued that existing semiconductor manufacturers are not producing chips quickly enough to meet his companies’ artificial intelligence and robotics needs. This power output target reflects the scale of Musk’s ambitions across his various technology ventures.

This effort is driven by the need to secure computing power for xAI’s Grok series of AI models and future space-based data centers. Musk is intent on capitalizing on the demand for AI compute by building data centers in space, which he has cited as a key reason for combining xAI with SpaceX. The combined entity of xAI and SpaceX is said to have a valuation of $1.25 trillion and is expected to go public in June. This public offering would combine Musk’s artificial intelligence and aerospace businesses under a single corporate umbrella.

Although the proposal was published on the county website, Musk clarified on Tuesday in a tweet that Grimes County, Texas, is only one of several locations under consideration for the factory. However, he emphasized that the project itself is non-negotiable for his business ecosystem. “We either build the Terafab or we don’t have the chips, and we need the chips, so we build the Terafab,” wrote Musk. This statement underscores the critical nature of the project for the future of his companies.

Why it matters

SpaceX is attempting to vertically integrate its supply chain by building a semiconductor facility, “Terafab,” to ensure it has the necessary computing power for its AI, robotics, and satellite ambitions.