Initial prototype fab operations are to be focused in Austin, Texas, in proximity to Tesla's existing Gigafactory Texas, with a permanent plant planned for Grimes County, Texas, on the site of a former electric generating plant. County filings in May 2026 estimated capital investment of US$55 billion for the initial phases and as much as $119 billion if all phases of the Grimes County facility are built. In August 2026 Tesla and SpaceX said they would invest about $16.8 billion in a first phase at that site.
Background and development
Terafab is intended to produce edge-inference chips for Tesla vehicles (see Tesla Autopilot) and Optimus robots.
The project was teased by Musk in early 2026 and officially announced on March 21, 2026, during a special event at the defunct Seaholm Power Plant in Austin, Texas. Musk described Terafab as "the next step towards becoming a galactic civilization", with the announcement accompanied by a live SpaceX broadcast on X and conceptual imagery of a prototype 100kW "AI Sat Mini".
Musk said that the global chip industry cannot expand quickly enough to meet the demand that Tesla will have for "edge inference compute" for Tesla vehicle and Optimus humanoid robot production, nor for the special semiconductor characteristics required for orbital AI infrastructure. Musk said all the current fabrication facilities on Earth produce only about 2% of what Tesla and SpaceX will need across all projects: "We either build the Terafab, or we don't have the chips, and we need the chips, so we build the Terafab." Terafab is a collaboration between SpaceX and Tesla under what SpaceX calls a "general framework" agreement.
In April 2026, Intel announced it would join the Terafab project, with its expertise in designing, fabricating and packaging ultra-high-performance chips. As of 2026, Intel is one of only three companies in the world producing leading-edge 2nm-class logic chips, the other two being Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. On April 22, 2026, during Tesla's first-quarter earnings call, Musk said Terafab planned to use Intel's 14A (1.4nm-class) process, which was "not yet totally complete" but, he said, "by the time Terafab scales up, 14A will be probably fairly mature or ready for prime time". He added that, as far as had been worked out so far, Tesla would build the research fab at Giga Texas while SpaceX would handle the initial phase of the scaled-up Terafab, with the arrangements still subject to approval by both companies' boards.
In June, SpaceX presented a more detailed first-generation satellite design called AI1.
An agreement for the first phase of the Grimes County project, signed by the Office of the Governor, the Anderson-Shiro school district and TeraFab AI, LLC under the Texas Jobs, Energy, Technology and Innovation (JETI) program and posted by the Texas Comptroller on August 25, 2026, lists a construction period from December 1, 2026, to December 31, 2028. SpaceX said the site would be powered by on-site natural-gas generation and large battery arrays, and Electrek noted that the power plan did not include Tesla solar equipment. SpaceX's May 2026 initial public offering registration statement said that Terafab was in the "very early stages", that SpaceX and Tesla had agreed only "a general framework for the future development of Terafab" with specific projects subject to separate negotiations, that financial terms and intellectual property rights had not been finalized, and that neither Tesla nor Intel was obligated to remain part of the project.
Prototype fabrication facility
Tesla is building a research fab, referred to in some coverage as the Advanced Technology Chip Fab (ATCF), on the North Campus of its existing Giga Texas site. It is intended to house the equipment for logic, memory, packaging, testing and photomask production in a single building, so that chips can be made, tested and redesigned in a rapid loop without shipping wafers between sites. Musk and Tesla executives have said they are not aware of any other facility that combines these capabilities. Two types of chips are planned: one optimized for edge inference, mainly for Tesla vehicles and Optimus robots, and a higher-power chip hardened for the space environment.
SpaceX said in August 2026 that Tesla had broken ground on the research fab in April 2026, although on April 22 Tesla said it had "finalized plans for the research chip fab" and would start construction later in the year.
At its March 2026 launch, Tesla said it was targeting 2-nanometer process technology and an initial output of 100,000 wafer starts per month for Terafab, a figure Musk had mentioned in 2025. The research fab at Giga Texas is much smaller: in April 2026 Musk said it would cost roughly $3 billion and be "capable of maybe a few thousand wafers per month. It's really intended to try out ideas". Tesla's fifth-generation AI chip, AI5, taped out in April 2026. Musk has said small quantities would be produced in 2026 and volume production in 2027, with the chip made by TSMC and Samsung rather than at Terafab.
Grimes County facility
In June 2026, Grimes County commissioners approved a reinvestment zone and a ten-year, 100% abatement of county property taxes on new improvements (tax years 2027–2036) for SpaceX's Terafab project on the former site of the Gibbons Creek Steam Electric Station, adjacent to the Gibbons Creek Reservoir. Grimes County is located southeast of the Bryan–College Station metropolitan area, home of Texas A&M University; the Texas A&M University System is developing a semiconductor institute facility at its RELLIS campus, planned for completion in 2028.
The adjacent reservoir, impounded in 1981 and used as a cooling pond for the power plant, is to supply water for the Terafab site's industrial operations instead of local groundwater, according to SpaceX.
The facility is planned to have more than 100,000,000 square feet (9,300,000 square metres) of manufacturing space, which SpaceX has described as the largest chip manufacturing facility on the planet. SpaceX has said the facility will employ at least 3,000 people; an economic development agreement signed with Grimes County in June 2026 had required a minimum of 1,800 full-time-equivalent jobs by the end of 2035. Some county residents have expressed concern about the scale of the project, its potential impact on the rural population, and its environmental consequences.
Musk has said the long-term goal is to scale to 1 million wafer starts per month at the full-scale facility. Electrek reported that he said the facility would produce between 100 and 200 billion custom AI and memory chips per year, whereas Tom's Hardware reported his projection as 100 to 200 gigawatts per year of Earth-based chip output.
In August 2026, SpaceX and Tesla announced that Terafab would be built at the Grimes County facility. SpaceX said the initial phase would require approximately $16.8 billion in capital investment from SpaceX and Tesla, with further phases potentially bringing the total much higher. SpaceX and Tesla said the chips would support applications including Tesla's Optimus humanoid robots and Cybercab vehicles and SpaceX's planned space-based data centers.
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