Tesla and SpaceX Commit 16.8 Billion to Build Terafab Chip Factory in Texas

Tesla and SpaceX committed $16.8 billion in early August 2026 to begin construction of Terafab, a vertically integrated semiconductor manufacturing complex in Grimes County, Texas, near the Gibbons Creek Reservoir.

The facility is designed to consolidate chip design, fabrication, memory production, advanced packaging, and testing under one roof. Chips produced at Terafab are intended for Tesla's Optimus humanoid robots and self-driving Cybercabs, as well as high-power computing chips for SpaceX's space-based data center infrastructure.

Elon Musk said the project is necessary because existing global chip production cannot meet the massive compute requirements of his companies.

Intel joined the project to contribute its manufacturing expertise and 14A, or 1.4 nanometer, manufacturing process. Before the full-scale facility becomes operational, Tesla has been developing a prototype Advanced Technology Fabrication facility at its existing Giga Texas site in Austin to allow for rapid iterations in chip design and testing.

The full-scale Terafab complex is expected to be one of the largest buildings on Earth, spanning more than 100 million square feet. While the initial investment is $16.8 billion, filings suggest total multi-phase spending could eventually reach $119 billion.

The project is expected to create at least 3,000 jobs in Grimes and Brazos County. The State of Texas provided a $30 million Texas Enterprise Fund grant, and the project qualifies under the Texas Jobs, Energy, Technology, and Innovation program.

SpaceX committed to using water from the Gibbons Creek Reservoir rather than local groundwater to support the facility's operations. Local residents have raised concerns about the transparency of tax incentives and potential environmental impacts on the rural area.