Tesla and SpaceX Commit $16.8B to Build 'Terafab' Chip Factory in Texas

Tesla and SpaceX announced Thursday that "Terafab," the advanced chip factory the two companies are jointly developing, will be built in Grimes County, Texas, outside Houston, with an initial investment of $16.8 billion. Reuters reported the figure on August 6, and TechCrunch confirmed that the first phase of the project will span more than 100 million square feet and employ at least 3,000 people from Grimes and nearby Brazos County. Texas Governor Greg Abbott's office separately announced a $30 million Texas Enterprise Fund grant for the project.

The Largest Building on Earth

In a post on Thursday, Elon Musk, CEO of both companies, wrote that the factory will be "the largest and most valuable building on Earth by far." According to SpaceX's website, the vertically integrated facility will house the manufacturing, packaging and testing of advanced logic and memory devices across more than 100 million square feet of manufacturing space, designed to "build new compute at an unprecedented scale and speed."

A Multi-Phase Silicon War Chest

The $16.8 billion commitment is the first phase of a larger plan: SpaceX filings from May 6 have suggested the company may spend as much as $119 billion on Terafab across a "multi-phase" construction program. Intel said in April it will contribute to the project, although it has remained cagey about the specifics of its involvement. The announcement lands amid a record chip cycle — the Semiconductor Industry Association reported Q2 global chip sales of $403.3 billion, up 35.1% sequentially — as compute-hungry AI workloads strain the existing supply chain.

Chips for Robots, Cybercabs and Space

SpaceX says Terafab will produce chips optimized for edge computing and inference for hardware like Tesla's Optimus robots and self-driving Cybercabs, along with high-power chips designed for operating SpaceX's space-based data centers. The vertical integration strategy would let the two companies control the full chip pipeline — from design through manufacturing, packaging and testing — inside a single facility.

Community and Tax-Break Questions

The announcement followed a heavily attended county meeting on Wednesday, where hundreds of residents raised concerns about millions of dollars in tax breaks awarded to the project and a lack of transparency, the Austin American-Statesman reported. The questions echo those that have followed other Tesla and SpaceX mega-projects in Texas, pitting job creation and investment against fiscal and environmental scrutiny.

Why It Matters

Two of the world's most valuable companies are moving chip production in-house at unprecedented scale, signaling that the compute race is becoming a manufacturing race. For the semiconductor industry, Terafab represents a new class of customer — a vertically integrated system builder that may buy fewer merchant chips over time — while for Texas it is among the largest manufacturing investments in state history. Whether the project reaches its $119 billion ambition depends on financing, execution and the resolution of the community questions that are now part of the deal.