Tesla, SpaceX to Invest Over $16.8B in Terafab’s First Phase
August 6, 2026
Tesla and SpaceX announced on August 6 that Terafab, the advanced chip plant they are jointly developing, will be built in Grimes County, Texas, with the first phase representing more than $16.8 billion in investment.
Elon Musk, who leads both companies, wrote in a post that the factory will be “the largest and most valuable building on Earth by far.”
The project would give Tesla and SpaceX dedicated chip-production capacity for their own needs.
More Than $16.8 Billion for the First Phase in Grimes County
According to the Texas governor’s office, the first phase represents an investment of more than $16.8 billion, and the project is expected to create 3,000 new jobs. The Terafab chip plant will rise in Grimes County, northwest of Houston, and SpaceX says more than 100 million square feet of manufacturing space is planned.
The state announcement describes the chip plant as combining logic, memory, and advanced packaging under one roof.
Chips for Optimus, Cybercab, and Data Centers in Orbit
Terafab is set to produce chips optimized for edge computing and inference, as well as high-power chips designed for SpaceX’s planned space-based data centers. The former are intended for Tesla’s Optimus humanoid robots and Cybercab robotaxis.
Reuters reports that Tesla and SpaceX expect their combined future compute requirements, measured in power terms, to exceed 1 terawatt. Terafab is intended to narrow the gap between current chip supply and that projected demand.
Tesla broke ground in April on a research facility at the North Campus of Giga Texas in Austin, which Reuters described as a precursor to Terafab. Cybercab, one of the products driving that demand, began public-road testing in Austin in June.
Intel has also said it will take part in Terafab. According to TechCrunch, the company says its design, fabrication, and packaging capabilities will support the project, though the scope of Intel’s role and any contract terms remain undisclosed.
County Documents Put Total Investment at Up to $119 Billion — as Local Scrutiny Grows
The figure of more than $16.8 billion covers only the first phase. Documents released by Grimes County in May state that the estimated capital investment for the “initial phases” is $55 billion, with an estimated total of as much as $119 billion if additional phases are constructed.
Because “first phase” and “initial phases” cover different scopes, the relationship between the two figures was not explained in the announcement. The $119 billion total is likewise an estimate that assumes additional phases, not a finalized spending plan.
The state of Texas has extended a $30 million Texas Enterprise Fund grant to SpaceX, and the facility qualifies as a project under JETI, the state’s incentive program for large capital investments.
Local reaction is mixed. TechCrunch reports that hundreds of residents attended a county meeting held ahead of the announcement, raising concerns over tax breaks and transparency.
The superintendent of the local Anderson-Shiro Consolidated Independent School District, Sarah Borowicz, welcomed the agreement, saying it would strengthen the district and expand opportunities. On water use, SpaceX said in its announcement post that the plant would draw from Gibbons Creek Reservoir rather than local groundwater. Electrek describes the reservoir as part of the site of the retired Gibbons Creek coal-fired power plant.
What to Watch Next
The scope of Intel’s role in Terafab and its contract terms have not been disclosed. The relationship between the first-phase investment of more than $16.8 billion and the $55 billion “initial phases” estimate in county documents also remains unexplained, and the $119 billion total is an estimate that depends on additional phases.
How officials address residents’ concerns about tax incentives will also shape the project’s relationship with surrounding communities.
Sources
Office of the Texas Governor – Governor Abbott Announces SpaceX Expansion In Grimes County
Grimes County, Texas – Notice of Public Hearing on Tax Abatement, PDF
TechCrunch – Tesla and SpaceX will invest $16.8B to start building ‘Terafab’ chip factory in Texas
TechCrunch – Intel signs on to Elon Musk’s Terafab chips project
ConstructConnect – Texas Chip Project Terafab Could Cost Up to $119 Billion
Electrek – Tesla, SpaceX confirm ‘Terafab’ chip fab site — $16.8B first phase
CNBC – Elon Musk’s Terafab chip factory in Texas could cost up to $119 billion, filing shows
