Tesla and SpaceX to jointly run “most epic chip-building exercise in history by far”

In the latest instance that Elon Musk views Tesla and SpaceX as effectively one company, the CEO of both announced Saturday that the two firms will join forces on his Terafab project — what Musk says will be “the most epic chip-building exercise in history by far.”

Many of the details mirror what we reported last week, with one major addition: SpaceX will play a leading role.

Terafab, planned for the north campus of Tesla’s Gigafactory Texas, aims to vertically integrate the entire chipmaking process, from design and fabrication to testing and packaging. The goal is to supply AI chips to Tesla, SpaceX, and its subsidiary, Musk’s AI company, xAI, whose suppliers Musk said will be unable to handle their demand in “three or four years.” While Tesla has designed its own chips, it has never manufactured them.

Musk said the facility is intended to produce up to 1 terawatt of compute annually. The plant will manufacture two types of chips: inference chips for Tesla’s robotaxis and Optimus robots, and custom AI chips intended for space-based applications like solar-powered AI satellites. According to Musk, roughly 80% of the compute will be allocated to space-related uses, with the remaining 20% supporting projects on Earth.

Morgan Stanley has estimated the project could cost Tesla an additional $35 billion to $45 billion in capital expenditures, though now perhaps some of that capex might be shared with SpaceX. Like many of Musk’s ambitions, the project is enormous in scale and will likely to take years to complete — potentially into the end of the decade or beyond.