TERAFAB

TERAFAB is a planned chip factory that Tesla and SpaceX intend to build together, with the stated goal of producing more than one terawatt of compute per year. A fab is a factory that turns blank silicon wafers into finished chips. Elon Musk unveiled the project on March 21, 2026, at the historic Seaholm Power Plant in Austin. The plan is to make the two companies' own artificial intelligence (AI) chips at a scale no one has ever attempted, instead of renting factory space from outside chipmakers.

What is TERAFAB?

TERAFAB is Tesla and SpaceX's attempt to own the hardest part of the AI supply chain: the chips. Tesla's own filings describe it as expanding into chip-making to keep its supply large enough and steady enough. Every chip is reserved for use inside the companies, with no plans to sell any to outside customers. Intel joined on April 7, 2026 to help design and build the fab.

Why TERAFAB Exists

Tesla expects its need for chips, driven by the Optimus humanoid robot, the Robotaxi and Cybercab, and Full Self-Driving (FSD), to outrun every source of supply that exists or is even planned. Tesla's Q1 2026 shareholder update says it is bringing logic, memory, and advanced packaging together in one place so it can move faster and lean less on outside chipmakers like TSMC, Samsung, and Micron. The deeper worry is a supply squeeze Tesla expects around 2028 to 2029, plus the risk that comes with relying on chips made overseas. Elon Musk's launch post split the goal at about 80% for computers in space and 20% for the ground, which makes TERAFAB the chip supply for orbital data centers as much as for cars and robots.

How it Works

The chips TERAFAB is meant to make follow Tesla's AI5 inference processor, a chip that runs trained neural networks, whose final design Tesla finished in April 2026 and which TSMC and Samsung will build. Tesla is aiming for a 50x jump in overall performance over the current AI4, made up of a 10x gain in raw computing power, 9x more memory, and a 5x gain on hardened block quantization and softmax, which are the math steps that let a chip run a neural network efficiently.

The fab breaks with decades of industry practice. Press accounts of the March 21, 2026 livestream reported a 2 nanometer (nm) process, meaning some of the smallest transistors made anywhere, although the only process Elon Musk has named on the record since is Intel's 14A. He also wants to drop the giant building-wide cleanroom in favor of sealing off each wafer on its own. He described the idea on Peter Diamandis's Moonshots podcast, according to Wccftech: "Tesla will have a 2nm fab, and I can eat a cheeseburger and smoke a cigar in the fab."

The Economics of TERAFAB

The first phase in Grimes County alone is more than $16.8 billion, according to the Texas governor's office, and the state added a $30 million grant from its Texas Enterprise Fund. The math underneath is simple: how many good wafers you make, set against the chip bill Tesla would otherwise pay outside chipmakers at full markup. Owning the line cuts out that markup, shortens how long chips take to arrive, and lowers the cost of each chip as volume climbs.

Current Status of TERAFAB

As of October 2026, TERAFAB is in early construction, ahead of chip production. Tesla's Q1 2026 update says the work starts with the Tesla-owned Research Fab on the Gigafactory Texas campus, and that the larger chip-capacity build-out is underway. On August 6, 2026, SpaceX and Texas Governor Greg Abbott announced the main TERAFAB site in Grimes County, Texas, northwest of Houston, with 3,000 jobs planned. The AI5 design is finished, with high-volume production at outside foundries planned for 2027 and the follow-on AI6 chip targeted for 2028.

What Comes Next

Press accounts of the March 21, 2026 livestream reported a starting target of about 100,000 wafer starts per month (WSPM), the number of blank wafers fed into production, and a long-term goal of 1 million. Neither figure appears in a company filing, and the only process Elon Musk has named on the record since is Intel's 14A.

For perspective, a top-of-the-line commercial fab today runs in the tens of thousands of WSPM, so 1 million would put one site in a class of its own. Elon has described the first step: the prototype fab in Austin, which he called "just the little advanced technology fab," may start at "maybe a few thousand wafers per month," and it is meant to try out ideas. A cleanroom-free, multibillion-dollar fab would change the economics of leading-edge chips.

The Bottom Line

TERAFAB is Elon Musk's bet that the cheapest way to guarantee enough AI chips is to stop buying them and start making them, at a scale and with a design that break most of the industry's rules. The keys to that bet are yields, the share of chips on each wafer that work, and power.