TLDR
- Elon Musk confirmed Tesla and SpaceX will keep buying Nvidia chips in large volumes
- Tesla’s fifth-generation AI5 chip launches March 21 via its Terafab project
- AI5 is built for edge AI in Tesla’s Optimus robot and robotaxi platform, not to replace Nvidia
- A wider rollout of Tesla’s Full Self-Driving Supervised update is coming within weeks
- SpaceX acquired xAI last month, with Musk now referring to the combined entity as “SpaceX AI”
Elon Musk confirmed this week that Tesla and SpaceX will continue purchasing Nvidia chips in large quantities, even as Tesla pushes forward with its own in-house chip development.
Musk said he is a “huge admirer” of Nvidia and its CEO Jensen Huang. He made the comments publicly while also announcing progress on Tesla’s next-generation processor.
Tesla is developing its fifth-generation AI chip, called AI5. The chip is being built with manufacturing partners TSMC and Samsung.
AI5 is designed primarily for edge computing. That means it handles real-time decision-making inside vehicles and robots, rather than relying on remote data centers.
The chip will power Tesla’s humanoid robot Optimus and its robotaxi platform. Tesla’s current vehicles run on the AI4 chip, while AI5 is now ready for early production.
Tesla’s Terafab Launch and Chip Roadmap
Tesla’s Terafab project, focused on producing AI5 chips at scale, is set to launch on March 21. Musk said AI5 will perform “far above its weight.”
The company is also already working on a sixth-generation chip, AI6. Musk said Tesla aims to move a new chip design into full production every year.
Nvidia’s hardware is widely used for training large AI models. Tesla’s own chips are not built to replace that role, but to work alongside it.
Musk said in early 2025 that Tesla uses both its own chips and Nvidia’s “in combination.” This week’s comments reinforce that strategy.
Tesla’s cars have used in-house chips since 2019, when the company moved away from Nvidia’s Drive processors for its vehicles.
FSD Update and Wall Street View
A broader rollout of Tesla’s Full Self-Driving Supervised software update is expected within the next few weeks. This would bring the latest version of Tesla’s assisted driving system to more users.
Tesla’s Wall Street position is mixed. Analysts give the stock a Hold consensus rating, with 13 Buy ratings, 11 Holds, and 7 Sells over the past three months.
The average analyst price target for Tesla shares sits at $399.25. That implies a modest upside of around 1.65% from current trading levels.
On the SpaceX side, Musk referred this week to the combined SpaceX and xAI entity as “SpaceX AI.” SpaceX acquired xAI last month in an all-stock deal.
The merger brings space infrastructure and AI development closer together under one structure. SpaceX is also reported to be preparing for a potential initial public offering later this year.
Musk’s wider strategy involves scaling computing power across Tesla, SpaceX, and related ventures. Continued Nvidia purchases are part of keeping that infrastructure running while proprietary alternatives are built out.
Tesla’s Terafab chip production facility is scheduled to go live on March 21.
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