SpaceX and Tesla to operate $55 billion AI chip facility in Texas
The joint venture aims to deliver massive computing capacity for artificial intelligence and robotics, backed by design assistance from Intel.
SpaceX has confirmed plans to invest at least $55 billion in a new artificial intelligence chip manufacturing facility named Terafab, located in Austin, Texas. The details of the project emerged from a public hearing notice filed in Grimes County, which seeks tax breaks for the initiative. While the initial commitment stands at $55 billion, the court filing indicates that the total expenditure could escalate to $119 billion should additional construction phases be approved and executed.
The proposed plant will be jointly operated by SpaceX and Tesla, with the primary objective of producing ultra-high-performance chips for artificial intelligence, robotics, and space-based data centres. Elon Musk first outlined these ambitious capacity targets in March, aiming for an annual output capable of supporting 200 gigawatts of computing power on Earth and one terawatt in space. To achieve this scale, Intel has formally agreed to assist with the design, fabrication, and packaging of the required chips.
This announcement arrives against a backdrop of surging demand for data centre semiconductors. Industry trends suggest a shift towards high-core-count processors to handle complex agentic AI workloads efficiently. Arm Holdings recently reported record fourth-quarter revenue, driven by a doubling in demand for new artificial general intelligence chips, reinforcing the strategic importance of such large-scale manufacturing projects.
SpaceX is simultaneously expanding its physical footprint for data processing beyond the proposed Texas site. The company currently operates a Colossus data centre in Memphis, Tennessee, which has recently signed an agreement to power AI models for Anthropic. This expansion underscores a broader strategy to secure the infrastructure necessary to support next-generation computing demands both on the ground and in orbit.
Despite the clear investment intent, the final cost of the Terafab project remains fluid. The potential for the budget to balloon to $119 billion depends heavily on whether future phases are deemed necessary and receive regulatory approval. Investors and industry observers will likely watch closely to see how the joint venture navigates the uncertainties inherent in such a massive capital deployment.
