TLDR
- SpaceX has filed plans to spend $55B on the first phase of its Terafab semiconductor facility in Austin, Texas
- Total cost across all phases could reach $119B, well above Morgan Stanley’s earlier estimate of $34B–$45B
- Terafab will produce chips for vehicles, robotaxis, humanoid robots, and space-based computing
- The project will use Intel’s 14A manufacturing process, described by Musk as “state of the art”
- SpaceX will carry most of the early costs, reducing the immediate burden on Tesla’s balance sheet
SpaceX has filed official government documents proposing $55 billion for the first phase of its Terafab semiconductor facility in Austin, Texas. If all phases are completed, the total investment could reach $119 billion.
BREAKING: SpaceX is proposing to spend $55 billion to begin construction of Terafab, Elon Musk's new semiconductor production facility in Texas.
The estimated total capital investment could rise to $119 billion if additional phases of the project are completed. pic.twitter.com/mgnfNaAIuP
— The Kobeissi Letter (@KobeissiLetter) May 6, 2026
The figure is much higher than Wall Street expected. Morgan Stanley had previously estimated the project would cost between $34 billion and $45 billion. The updated numbers were first reported by Bloomberg and confirmed through documents posted on a Texas county website.
Terafab is a joint project between SpaceX and Tesla. The goal is to build enough in-house chip capacity to supply both companies with the semiconductors they need for AI, robotics, and space systems.
Elon Musk first unveiled the Terafab concept in March. He has argued that existing chipmakers are not scaling fast enough to meet demand from next-generation AI systems.
“Without the Terafab, we don’t see a path to having enough chips for AI given the rate at which the industry is growing,” Musk told investors recently.
The facility will start as a smaller advanced fabrication unit focused on designing and testing chips. From there, the plan is to scale into a much larger operation over time.
Two Types of Chips
Terafab is designed to produce two categories of chips. The first are lower-power processors for vehicles, robotaxis, and humanoid robots. The second are higher-performance chips built for space-based computing.
Musk has spoken about supporting large-scale computing capacity both on Earth and in orbit, though he has not given a specific timeline for that vision.
Intel’s Role
Last month, Musk confirmed that Terafab will use Intel’s 14A manufacturing process. He called it “state of the art” during Tesla’s most recent earnings call.
“We plan to use Intel’s 14A process, which is state of the art and in fact not yet totally complete,” Musk said. He added that the technology would be “fairly mature” by the time Terafab becomes operational.
Intel’s involvement in the project had been announced a few weeks before Musk’s comments. Musk praised Intel’s team, including chief executive Lip-Bu Tan.
Some analysts have raised the question of whether the project will need to bring in outside funding, given the scale and complexity of building a chip plant of this size.
On Tesla’s earnings call, Musk said SpaceX would handle the bulk of the early spending. Any financial arrangements between the two companies must be approved by both boards and go through a conflict resolution process.
“It’s going to have, unfortunately, a lot of complexity because we’ve got to make sure Tesla shareholders are served and SpaceX shareholders are served,” Musk said.
SpaceX recently acquired Musk’s AI company xAI, ahead of a planned initial public offering later this year. Some analysts have speculated that the Terafab project could eventually lead to a merger between SpaceX and Tesla, though no such plans have been announced.
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