SpaceX and Tesla by Elon Musk to begin to will invest $16.8 billion so as to build Terafab, which is an advanced AI semiconductor complex located in Grimes County, Texas, as the companies compete to secure the chip capacity which the billionaire has called vital to their futures.
The plant is meant to help bridge the gap between global chip supply and the over 1 terawatt of computing power which SpaceX and Tesla will likely require in the years to come.
The advanced AI semiconductor complex will employ no less than 3,000 people and future expansion stages may drive overall investment much higher, SpaceX said in an announcement on its website on August 6, 2026.
According to Musk, “The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying jobs in the Lone Star State, and enabling us to produce AI chips at scale for use on Earth and in space,”
Musk has been integrating his AI efforts across his companies. SpaceX bought his startup xAI earlier in 2026 in a deal to construct space-based data centers before becoming public in June 2026 in the biggest IPO ever.
The $100 billion Terafab factory will be a single roof for advanced logic and memory chips, packaging and testing, and it will manufacture the processors required to power the Optimus robots and Cybercabs from Tesla, along with high-power chips in order to operate space-based data centers from SpaceX.
SpaceX had suggested an initial investment of $55 billion so that it could construct the Terafab, with the overall amount rising to $119 billion if additional phases are finished, according to a filing from May 2026.
To help with the efforts, SpaceX earlier in 2026 collaborated with Intel, which has been attempting to broaden its chip contract manufacturing business in the course of a turnaround strategy.
In April 2026, Tesla started work on a research space located at the North Campus of its Giga Texas plant, which is a precursor to Terafab.
Notably, the Grimes County site is located near the Gibbons Creek Reservoir, which the companies intend to utilise for industrial operations instead of groundwater from the local aquifer.
It is another part of the expanding Texas footprint of SpaceX and Tesla, along with locations at Starbase, Bastrop as well as McGregor.
As per Texas Governor Greg Abbott’s statement, “Texas is where big ideas get even bigger.”