Elon Musk first described Terafab in March, at an event in a decommissioned Austin power plant, as the most epic chip-building exercise in history. On Thursday it got an address. SpaceX and Tesla said in posts on their own websites that the factory will be built in Grimes County, Texas, about an hour northwest of Houston, with an initial investment of $16.8 billion. Musk added in a post on X that it will be "the largest and most valuable building on Earth by far."
The date was loaded for other reasons. Thursday was the first expiration of the lock-up on SpaceX stock since the company listed on June 12, freeing roughly 911.5 million insider shares to trade for the first time. The stock had closed Wednesday at an all-time low of $108.27, 49% below the $225.64 record it set on June 16 and well under its $135 IPO price. Shares rose during Thursday's session rather than falling.
A fab is the plant where blank silicon wafers are etched into finished chips, a process that normally takes years of construction and billions of dollars before a single working part comes out the other end. Terafab is meant to go further than that. SpaceX says the site will handle logic chips, memory chips, packaging and testing in one location, steps that are usually divided among separate companies on separate continents.
The pitch is about supply, not invention. SpaceX describes the plant as one that will "bridge the divide between current global chip supply and the compute demand" of the future. Until now, Tesla and SpaceX bought chips the way everyone else does, from suppliers including TSMC, Samsung and Micron. The claim now is that buying will not be enough at any price. Musk puts the two companies' combined need above 1 terawatt of compute a year, against a global industry he estimates produces roughly 20 gigawatts.
What the companies have committed to
More than 100 million square feet of manufacturing space is planned, with at least 3,000 employees drawn from Grimes and neighboring Brazos County. The chips are intended for inference, the step where a trained AI model actually runs, inside Tesla's Optimus robots and Cybercabs, plus higher-power parts for the data centers SpaceX wants to put in orbit. Musk said Thursday that about 25% of the output would go to Optimus and 75% to spacecraft.
Neither company has ever manufactured a chip. Intel said in a corporate post on X in April that it would help design, fabricate and package the parts, joining the effort without detailing its contributions, and it has not been more specific since.
The filings describe a bigger and looser project
Public documents have put larger numbers on Terafab than Thursday's announcement did. A Grimes County tax-abatement notice estimated total spending of up to $119 billion across a multi-phase build, as TechCrunch reported in May from the county's own posting, and put the initial investment at $55 billion. Thursday's $16.8 billion first phase is less than a third of that figure, and the companies did not explain how the two relate.
SpaceX's IPO paperwork was more cautious still, calling Terafab a general framework with no binding commitments and no finalized split of intellectual property, leaving either side free to stop participating. SpaceX did not mention Terafab at all on Tuesday's earnings call, its first as a public company. For scale, TSMC is spending about $165 billion on six fabs in Arizona.
Grimes County has not gone quiet
Residents have spent months objecting to the incentives and the process. At a packed commissioners court meeting on Wednesday, first reported by KBTX in Bryan-College Station, a SpaceX attorney told the room the abatement is closer to 78% than the 100% figure that had circulated, and that the company will pay the county $20 million a year for 35 years, $710 million in total.
Residents also delivered a petition with 894 signatures asking for enforceable protections on water, roads and emergency services before any more incentives are granted. SpaceX says it is committing to draw water from the Gibbons Creek Reservoir instead of local groundwater, and to build its own gas-fired power plants rather than pull from the state grid.
For investors, the number that matters is not $16.8 billion but whose balance sheet it lands on, and how much of the $119 billion follows. SpaceX lost $541 million in the second quarter even as revenue rose 92%. Terafab now has a county, a water source and a price tag. It does not yet have a chip.