Musk’s Tesla, SpaceX Confirm $16.8 Billion ‘Terafab’ Chip Plant as World’s Largest Building in Texas

Tesla and SpaceX confirmed Thursday that they will jointly build a massive semiconductor manufacturing facility called Terafab in Grimes County, Texas, with an initial investment of $16.8 billion for a project the companies say will become the largest and most valuable building on Earth.

The facility will be located roughly 70 miles northwest of Houston, in a rural stretch of Grimes County east of College Station, according to multiple outlets covering the announcement. Elon Musk, who serves as chief executive of both Tesla and SpaceX, described the scale of the planned building in a post on the social platform X. “Terafab Texas will be the largest and most valuable building on Earth by far. And it will be stunningly beautiful,” Musk wrote.

According to figures shared by SpaceX and Tesla, the completed facility is planned to span more than 100 million square feet of manufacturing space, a footprint more than five times larger than the New Century Global Center in Chengdu, China, which currently holds the record as the world’s largest building at approximately 18.9 million square feet, according to Fortune. The Terafab campus is also expected to be more than twice the size of Tesla’s existing 2,500-acre Gigafactory site outside Austin, according to the Austin American-Statesman.

SpaceX described the strategic rationale behind the project in a statement posted to its website. “The facility will be an advanced semiconductor fab that will bridge the divide between current global chip supply and the compute demand of the future,” the statement read. The company further explained that the combined chip demand from Tesla and SpaceX alone is expected to exceed available global supply in the coming years. “While we are deeply appreciative of our current chip suppliers and encourage them to expand production whenever possible, this looming gulf between supply and demand is at the core of Terafab’s necessity,” SpaceX said, according to Fox Business.

Musk framed the project as central to his broader vision for the future of both companies, one built around large-scale automation, autonomous transportation and space-based computing infrastructure. “We’re now embarking on the most epic chip-building effort—combining logic, memory, and advanced packaging all under one roof,” Musk said in a press release cited by Fortune. According to the same report, Musk described Terafab’s mission as helping to “close the gap” between current chip production capacity and the far larger demand he expects will eventually accompany humanity’s expansion into space.

Musk expanded on that broader vision in comments made when first announcing the project. “In order to understand the universe, you must explore the universe,” Musk said, according to Yahoo Finance. “And that’s the motivation to accelerate humanity’s future in understanding the universe and extending the light of consciousness to the stars.”

According to Yahoo Finance, the Terafab facility is expected to target production of advanced 2-nanometer chips, with a goal of manufacturing up to 50 times the number of AI chips currently produced annually by major global chip suppliers. The plant is designed to produce two distinct categories of semiconductors: chips intended for Tesla’s self-driving vehicles, robotaxis and Optimus humanoid robots, and separate, specialized chips engineered to withstand the extreme conditions of space for use in SpaceX’s satellite and spacecraft systems. According to Fortune, the completed facility is designed to produce more than 1 terawatt of compute annually once fully operational.

The initial phase of construction is expected to create at least 3,000 jobs, with many of those positions expected to go to residents of Grimes and neighboring Brazos counties, according to the Houston Chronicle. Texas Gov. Greg Abbott addressed the scale of the project’s initial economic impact directly, according to Fortune’s reporting. “The first phase of the Terafab project represents a capital investment of more than $16.8 billion and will create 3,000 new jobs,” Abbott said.

The $16.8 billion figure represents only the first phase of a project SpaceX has suggested could ultimately grow far larger. According to TechCrunch, SpaceX has indicated in regulatory filings that it may spend as much as $119 billion on Terafab across a multi-phase construction plan, though the company did not discuss the project during its most recent earnings call. Semiconductor giant Intel has also agreed to contribute to the Terafab project, though the company has not disclosed the specific scale of its involvement, according to TechCrunch’s reporting.

Local officials in Grimes County have moved to address community concerns regarding the project’s rapid development and the tax incentives associated with it. According to the Austin American-Statesman, Terafab representatives, including a company official identified as Trettel, stressed the project’s goal of strengthening domestic chip manufacturing capacity and boosting the local job market during meetings with area residents. County commissioners were told they could expect to see architectural renderings of the planned facility within the coming days. Terafab representatives also defended the property tax breaks the project has received from Grimes County and area school districts, pointing to a structure under which the company will make fixed annual payments to the county over the next 35 years in place of standard property tax obligations.

Some financial analysts have offered independent cost estimates for the project that diverge somewhat from the companies’ own figures. According to Yahoo Finance, some analysts project the facility could ultimately cost more than $20 billion, placing it among the largest individual semiconductor manufacturing investments in the world, at a moment when major technology companies, including Meta Platforms, are racing to secure reliable chip supply amid an industrywide memory shortage.

Tesla and SpaceX confirmed the joint venture also includes participation from xAI, Musk’s artificial intelligence company, alongside Intel’s previously disclosed involvement, according to the Houston Chronicle. As construction on Terafab’s first phase moves forward in Grimes County, the project is expected to remain closely watched both for its unprecedented physical scale and for what it signals about the scope of Musk’s ambitions to vertically integrate chip production across his network of companies, spanning applications ranging from autonomous vehicles and humanoid robots on Earth to specialized computing hardware intended for use in space.