Musk's Terafab chip factory in Texas could cost up to $119 billion, filing shows

Elon Musk's Terafab chip manufacturing complex in East Texas could require capital investment of up to $119 billion across its full buildout, according to a public hearing notice filed in Grimes County. The first phase alone carries an estimated cost of at least $55 billion, making it one of the largest semiconductor infrastructure commitments ever announced by a private entity.

SpaceX, which controls the project and is led by Musk, submitted the notice as part of an application for a property tax abatement agreement with Grimes County. A public hearing is scheduled for 3 June to consider the proposed tax breaks.

Musk officially launched Terafab in March, describing it as the most ambitious chip-building effort ever attempted, combining logic, memory, and advanced packaging under a single roof. The facility is intended to supply chips to SpaceX, xAI, and Tesla, all of which will jointly fund and construct the complex. For more on the SpaceX and xAI merger that preceded this announcement, see the earlier SpaceX acquisition of xAI in a $1.25 trillion merger.

Intel announced in April it would join the Terafab project to help design, fabricate, and package ultra-high-performance chips at scale. It marks the first major outside manufacturing commitment for Intel's foundry division, which has historically produced chips only for its own product lines. Tezons covers developments in AI and technology as the semiconductor landscape continues to shift.

Tesla plans to use Intel's 14A process at Terafab

During Tesla's first-quarter earnings call in April 2026, Musk confirmed that Tesla plans to use Intel's forthcoming 14A process to produce chips at the Texas facility. The announcement sent Intel's share price sharply higher, giving the company its best monthly performance on record in April, with the stock more than doubling in value.

Intel's inclusion in Terafab positions it to capture demand from the AI infrastructure boom at a time when manufacturing capacity at Taiwan Semiconductor Manufacturing Company is heavily committed years in advance. Nvidia and Apple have reserved significant TSMC capacity, leaving newer entrants with limited options and making in-house or alternative foundry arrangements increasingly attractive.

Chip analyst Ben Bajarin of Creative Strategies described Musk's approach as a 15-year strategy, rooted in the recognition that his companies would struggle to secure priority at TSMC. Bajarin cautioned that chip manufacturing is a technically mature industry with significant constraints, warning that foundry capability cannot be built quickly or cheaply.

Research fab in Austin to precede scaled production

Musk said on the Tesla earnings call that SpaceX will lead the initial phase of the scaled Terafab, while Tesla builds a smaller research facility at its Austin factory at a cost of around $3 billion. That research fab is expected to produce a few thousand wafers per month and will serve as a development platform ahead of full-scale production at the Grimes County site.

SpaceX IPO filing adds financial context to project scale

The cost disclosures arrive as SpaceX prepares for a public offering. The company filed confidentially for an IPO in April 2026, weeks after completing its merger with xAI in a transaction that valued the combined entity at $1.75 trillion. The Terafab investment estimates are expected to feature prominently in any prospectus given their scale relative to the company's reported annual loss of approximately $5 billion for 2025.

Musk has previously cited geopolitical risk as a core rationale for the project. On Tesla's January earnings call, he said key chip suppliers could not produce enough hardware to meet demand, and that Terafab would protect his companies against supply chain disruption arising from international tensions. The Grimes County filing translates that stated ambition into concrete capital figures for the first time.

Musk also confirmed that xAI will be dissolved as a separate company and rebranded as SpaceXAI, further consolidating the entities behind the Terafab initiative under a single corporate structure.

What Terafab means for US semiconductor competition

If the full $119 billion buildout proceeds, Terafab would represent a commitment comparable in scale to the combined public and private investment mobilised under the US CHIPS Act. The project signals a broader shift in which technology companies with captive chip demand are seeking to own their manufacturing rather than rely on a small number of offshore foundries. Whether SpaceX can execute a greenfield semiconductor facility at this scale remains an open question, but the Grimes County filing confirms the financial parameters are serious and the county-level approval process has formally begun.