SpaceX said Thursday it will build Terafab, the semiconductor venture it shares with Tesla, in Grimes County, Texas, ending months of uncertainty over the project’s final location.
The announcement, published on SpaceX’s website, puts the initial phase of the facility at approximately $16.8 billion in capital investment from the two companies and commits to at least 3,000 jobs.
SpaceX shares traded 6.0% higher at $115 following the announcement, leaving the stock roughly 17% below the $135 price at which the company completed its record initial public offering in June.
Terafab is planned as a vertically integrated complex with more than 100 million square feet of manufacturing space, housing the production, packaging and testing of advanced logic and memory devices under one roof.
SpaceX described the project as “the most epic-chip building effort in the world” and said combined chip demand from SpaceX and Tesla is expected to exceed 1 terawatt of compute, a figure the company called significantly larger than current global supply.
Output will span chips optimized for edge computing and inference, destined for Tesla‘s Optimus robots and self-driving Cybercabs, alongside high-power silicon for the space-based data centers SpaceX plans to operate in orbit.
Tesla described on X Terafab as “the largest chip manufacturing facility ever” and repeated that both companies will need far more chips than current and future global production can supply.
From an Austin Stage to Rural Texas
Elon Musk unveiled Terafab on March 21 at Austin’s defunct Seaholm Power Plant, presenting the project as a joint venture between Tesla, SpaceX and xAI, the AI developer SpaceX absorbed in an all-stock deal in February.
Cost estimates at launch ranged from $20 billion to $25 billion, with initial capacity targets of 100,000 wafer starts per month scaling toward one million.
Intel joined the project in April, and Musk subsequently said the fab would rely on the chipmaker’s next-generation 14A manufacturing process.
A regulatory filing made public in early May put SpaceX’s proposed initial investment for the Texas facility at $55 billion, according to Reuters.
Tesla broke ground in April on a research fab at the North Campus of Giga Texas, which Thursday’s announcement describes as the precursor to Terafab.
Grimes County commissioners voted 4–1 in early June to designate a reinvestment zone covering more than 22,000 acres around the Gibbons Creek Reservoir and to approve a tax abatement package for the site, according to KBTX.
SpaceX chief financial officer Bret Johnsen signed the agreements later that month, legally committing the company to invest at least $5 billion in the county by 2030 and create at least 1,800 full-time jobs by 2035 while retaining the right to walk away with 30 days’ written notice and a maximum penalty of $60 million.
Leadership followed the paperwork.
Tesla hired Gary Jiang, a nearly 18-year Intel manufacturing veteran who most recently ran the chipmaker’s 18A factory ramp in Arizona, as director of Terafab in June, as EV first identified.
SpaceX paid Grimes County a non-refundable $10 million this week, ahead of the deadline written into the tax agreement, and Musk publicly confirmed the payment on X.
SpaceX environment, health, safety and medical lead Jordan Buss told the meeting the project is “strategically vital for the United States and for Western civilization.”
Figures That Do Not Yet Line Up
Thursday’s $16.8 billion first-phase figure lands well below the numbers previously attached to the project, from the $55 billion in the May filing to county-cited estimates that put total investment as high as $119 billion.
SpaceX framed the gap itself, noting that potential future expansion phases would bring total investment much higher.
The announcement also names only SpaceX and Tesla as investors. Intel and xAI, both previously identified as Terafab participants, do not appear anywhere in the text.
Wall Street has already built theses around the venture. Wedbush called Terafab the first step toward a Tesla–SpaceX merger it expects in 2027, while RBC estimated the project could help Tesla avoid $1.5 trillion in external chip spendingby 2050.
Barclays struck a more cautious note in April, warning that Terafab excitement masks a capital expenditure burden on top of a Tesla budget already exceeding $20 billion for 2026.
Water, Power and County Terms
SpaceX committed in the announcement to drawing industrial water from the Gibbons Creek Reservoir rather than local groundwater, building on-site wastewater treatment, and pursuing water reuse and conservation on the site.
On paper, the county deal grants a 100% property-tax abatement on buildings and equipment for 10 years from 2027, in exchange for the $10 million upfront payment and fixed annual payments of $20 million running 35 years, a total of $710 million, per agreement documents reviewed by KBTX.
SpaceX attorney Buck Brannon told Wednesday’s session that structure works out to an effective abatement of roughly 78%, not the full exemption some earlier reports suggested.
Local hiring features prominently in the company’s pitch. SpaceX said many of the minimum 3,000 employees will come from Grimes and neighboring Brazos County, citing a 60% to 80% local-hire share at its other Texas sites.
The company added that its Texas footprint has generated more than 56,000 direct and indirect jobs and over $28 billion in estimated economic impact since 2024.
A Rebound After a Punishing Week
Thursday’s 3.0% gain interrupts a brutal stretch for the newly listed stock.
SPCX raised about $75 billion in its June 12 debut on the Nasdaq, the largest IPO on record, closing its first day at $160.95 before climbing as high as roughly $225 in the following weeks.
Shares have since lost more than half their value from that intraday peak, and short interest in SpaceX overtook Tesla‘s ahead of this week’s first lockup expiration, which Bernstein estimates makes 20% to 30% of restricted insider shares eligible for sale, per CNBC.
SpaceX reported its first quarterly results as a public company on August 4, beating revenue expectations, but the stock fell 11.2% in Wednesday’s premarket as investors focused on the unlock.
Chip supply remains the thread connecting the two companies’ roadmaps.
Tesla taped out its AI5 processor in April for dual-sourced production at TSMC’s Arizona fab and Samsung’s Texas plant, and Musk has detailed follow-on AI6 and AI6.5 designs intended to extend that in-house silicon push.
