SpaceX and Tesla are launching the megaproject Terafab: $17 billion for chips for robots and orbital data centers.
Elon Musk's ambitious technology alliance is taking concrete shape: on August 6, SpaceX and Tesla officially confirmed the site selection for the construction of the Terafab chip manufacturing plant in Grimes County, Texas. Initial investments in the project will total $16.8 billion, marking one of the largest infrastructure moves in the history of both companies.
Scale and specialization: from robots to orbital computing
The manufacturing complex, sprawling across 9.3 million square meters, will become a true industry giant. A single facility will integrate semiconductor production, packaging, and testing processes, creating at least 3,000 jobs for residents of Grimes and Brazos counties. A key feature is the two-sector specialization: the first line will produce chips for edge computing and inference needed for Tesla Optimus robots and Cybercab robotaxis, while the second will deliver high-performance solutions for SpaceX orbital data centers.
The location near Gibbons Creek Reservoir, previously used to cool a coal-fired power plant closed in 2018, appears strategically sound. The company has made a firm commitment to use exclusively this water resource, without tapping into the region's groundwater sources.
Legal structure and investment realities
Notably, in SpaceX's IPO prospectus, the Terafab project is characterized as a "general framework" without binding agreements between the parties. This leaves room for maneuver: intellectual property rights distribution is not fixed, and there are no obligations for further participation. Intel's involvement, announced in April, also remains vague, although this giant is rumored to bear the main production burden.
The project's financial dynamics are impressive: Musk initially announced $25 billion, but the current figure of $16.8 billion is only the first phase, with the total expenditure potential estimated at $119 billion. This aligns with the sharp rise in SpaceX's capital expenditures on AI infrastructure, which reached $18.37 billion in the second quarter, a sixfold increase year over year.
Tax incentives and public tension
The project has not been without bureaucratic and social complications. The Grimes County Commissioners Court approved a full property tax exemption until 2036 in exchange for fixed payments—$10 million upfront and $20 million annually. However, after the documents were published, a contradiction emerged: the stated investments of $55 billion versus the $5 billion contractually fixed by 2030 sparked a wave of discontent among local residents concerned about the strain on the power grid and water resources.
SpaceX lawyers counter that, accounting for the fixed payments, the effective tax discount is about 78%, and the total payments to the county over 35 years will reach $710 million. The company has also committed to building its own gas-fired power plants and operating on a closed-loop water cycle, which should address environmental concerns.
My analysis: Terafab is not just a plant but a strategic bet on vertical integration in a field critical to the industry's future. However, such a complex legal structure and dependence on tax incentives make the project vulnerable to political and economic fluctuations. Success here will depend not only on technology but also on Musk's ability to balance ambitions with commitments to the local community.