Tesla and SpaceX will invest $16.8 billion in a chip factory in Texas

Tesla and SpaceX announced this week a $16.8 billion investment to start building the “Terafab” chip factory in Texas, a move that reinforces Elon Musk’s bet on in-house semiconductor production.

A factory at massive scale

The “Terafab” project aims to produce chips at large scale to power both companies’ artificial intelligence and computing needs, from the data centers training xAI’s models to Tesla’s autonomous driving systems and SpaceX’s flight software.

The Texas location takes advantage of the industrial ecosystem Musk has built in the state, which already hosts Tesla’s Gigafactory and SpaceX’s launch facilities in Boca Chica.

Less dependence on third parties

The decision reflects the trend of big tech companies to vertically integrate chip production, in a market where demand for AI semiconductors far exceeds supply and where control of the supply chain has become strategic.

Why it matters

Beyond the scale of the investment, the project shows where the industry is heading: AI is pushing companies to build their own computing infrastructure. That move will have effects on global semiconductor prices and on the map of tech manufacturing in the coming years.