Tesla and SpaceX's 'Terafab' to build AI chips in Texas
22 Mar 2026

Elon Musk has announced that his ambitious Terafab project will be built in Austin, Texas.

The project, which aims to manufacture chips for robotics, artificial intelligence (AI), and space data centers, will be a joint venture between Tesla and SpaceX.

The billionaire entrepreneur revealed the plans at an event in downtown Austin attended by Texas Governor Greg Abbott.

What is the Terafab project?
Project details

The Terafab project will kick off with an "advanced technology fab" in Austin, equipped to manufacture and test all kinds of chips.

Despite having no experience in semiconductor manufacturing, Musk had previously said that the company would start with a smaller-scale fab before moving on to a larger one.

The facility is expected to be located near Tesla's existing Austin headquarters and gigafactory.

Musk's chip demand and the semiconductor industry's growth
Demand fulfillment

Musk has argued that the semiconductor industry is growing too slowly to meet his expected chip demand.

He said, "That rate is much less than we'd like. We either build the Terafab, or we don't have the chips, and we need the chips, so we build the Terafab."

The project aims to support one terawatt of computing power per year, as Musk ramps up investments in AI and robotics.

Types of chips produced at the Austin facility
Production plans

The Terafab facility is expected to produce two types of chips.

One will be optimized for edge and inference, mainly for Tesla's vehicles, robotaxis, and Optimus humanoid robots.

The other will be a high-power chip designed for space use by SpaceX and xAI. Musk expects xAI to consume most of the chips produced at this facility.

SpaceX's planned IPO and mini data center satellite system
Future plans

Musk also teased a "mini" AI data center satellite, which would be part of a larger satellite system SpaceX plans to build for complex computing in space.

The company has already applied for permission to launch one million data center satellites into orbit around Earth.

This project is one of the key factors behind SpaceX's planned IPO later this year, which could raise up to $50 billion.