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“SpaceX and Tesla’s “Terafab” AI Chip Project Could Reach $119 Billion, Far Above Estimates” 🚨

A massive joint semiconductor initiative between Tesla and SpaceX could carry a far higher price tag than previously expected, underscoring the scale of Elon Musk’s push into in-house AI chip production.

According to a Reuters report citing a Texas county filing, the first phase of the project—known as “Terafab”—is projected to cost around $55 billion. When later phases are included, total capital investment could climb as high as $119 billion.

That figure significantly exceeds earlier estimates from Morgan Stanley, which had placed the project’s total cost between $34 billion and $45 billion.

The Terafab initiative is designed to build large-scale domestic manufacturing capacity for AI chips, aiming to supply both Tesla and SpaceX as demand for high-performance computing accelerates across autonomous vehicles, robotics, and space systems.

One notable structural detail is that much of the early capital spending is expected to be carried by SpaceX, easing near-term pressure on Tesla’s balance sheet as its own capital expenditures rise sharply.

Elon Musk addressed the complexity of the arrangement during a recent earnings call, noting that SpaceX would fund the initial phase while ensuring both companies’ boards approve intercompany transactions to avoid conflicts of interest.

He emphasized the need to balance stakeholder interests across both firms, given the overlapping ownership structure and the scale of investment involved.

If fully realized, Terafab would represent one of the largest private-sector investments in semiconductor infrastructure, signaling how aggressively Musk-led companies are moving toward vertical integration in AI and hardware manufacturing.