SpaceX to Spend at Least $55 Billion on Texas Chip Project

SpaceX has unveiled the estimated cost of its planned semiconductor manufacturing facility in Grimes County, Texas.

The project, dubbed Terafab, could initially cost $55 billion and rise to $119 billion if additional phases are built, according to a public notice posted on May 5 on Grimes County’s website.

SpaceX founder Elon Musk announced the project in March as a joint venture among his companies SpaceX, xAI, and Tesla. In April, U.S. chipmaker Intel joined the effort as a partner.

The facility is intended to design and manufacture what Musk has described as “ultra-high-performance” artificial intelligence (AI) chips. Those chips would be used to power Tesla’s Optimus humanoid robots and driverless Robotaxis, as well as space-optimized computing systems for SpaceX satellites capable of handling AI workloads in orbit.

Musk has said the plant will aim to produce about 1 terawatt of annual compute. For comparison, the average electricity demand of the entire United States is roughly 0.5 terawatts. This means that chips produced by the Texas factory each year, if fully deployed, could eventually require power equivalent to roughly twice the current average demand of the U.S. grid.

The proposed site of the facility is near Gibbons Creek Reservoir within a newly designated reinvestment zone, according to the May 5 notice. The reservoir is about 100 miles from Tesla’s headquarters in Austin, and about 20 miles east of College Station, home of Texas A&M University.

“SpaceX proposes construction of a multi-phase, next-generation, vertically integrated semiconductor manufacturing and advanced computing fabrication facility, which would represent a transformative investment in domestic semiconductor manufacturing capacity,” the notice states.

Grimes County commissioners will meet on June 3 to consider approval of a property tax abatement for the project, according to the notice.

Many technology companies design their own semiconductors but rely on outside manufacturers to make them in specialized chip-fabrication plants. The Terafab project represents Musk’s latest effort to reduce dependence on outside suppliers such as Taiwan’s TSMC and Nvidia by building his own proprietary pipeline for AI hardware.

The projected cost is notably higher than previous analyst estimates. Morgan Stanley estimated in March that total capital expenditures for a facility at the scale Musk had described could reach $35 billion to $45 billion, including roughly $20 billion to $25 billion for wafer-fabrication equipment alone.

The Terafab project comes as SpaceX prepares to go public in what is expected to be one of the largest initial public offerings in history.

SpaceX took xAI as a subsidiary in February. At the time, SpaceX was valued at $1 trillion, while xAI, the developer of the Grok chatbot, was valued at $250 billion.

As SpaceX moves closer to its market debut, more details about Terafab could be disclosed in public filings.