Elon Musk’s push to control more of his AI supply chain may now come with a $119 billion price tag.
New filings tied to a proposed SpaceX semiconductor facility in Texas suggest the project could expand into one of the most expensive chip manufacturing efforts in the US. The plant, reportedly called Terafab, would support Musk’s growing AI and computing ambitions across companies, including Tesla, xAI, and SpaceX.
The proposal comes as AI companies race for chip capacity, US policymakers push domestic semiconductor manufacturing, and geopolitical tensions make overseas supply chains feel less dependable.
Musk’s semiconductor dream keeps getting bigger
Introduced in March by SpaceX, the Terafab proposal has rapidly evolved into a giant semiconductor complex planned for rural Texas. It is expected to be located in East Texas, specifically near the Gibbons Creek Reservoir.
Grimes County filings show that the project’s estimated cost has ballooned from roughly $20 billion in March to $119 billion through future expansion phases. Nearly half of that ($55 billion) will be used for the early-stage development of the plant. Also, it’s building a $3 billion research fab in Austin, Texas, while this is still taking shape.
By June 3, County officials will meet to decide whether to approve the tax incentive Musk proposed for locating his Terafab chip plant in the region.
Intel joins the party
Building this plant is a combined effort from three of Musk’s chip-heavy companies: Tesla, xAI, and SpaceX. One of the country’s largest and oldest chipmakers, Intel, is coming on board, making it the project’s fourth supporting arm.
Intel, which has always manufactured chips for its own products, says it will help the Terafab project “design, fabricate, and package ultra-high-performance chips at scale,” as per CNBC.
Confirming the development, Musk, during Tesla’s first quarterly earnings call for the year, specified that Terafab chips will be using Intel’s new 14A process to design chips made at Terafab.
Shortly after the report went public, Intel’s stock price rose sharply, a clear indicator of investor confidence in the partnership.
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Why Musk is building TeraFab
At the core of the TeraFab project is control.
The rapid acceleration of AI systems has increased pressure across the entire semiconductor supply chain. As a result, production capacity is being stretched to its limits, and allocation is insufficient to meet rising demand. That imbalance has driven up costs and left many reliant computing firms competing for access rather than scaling smoothly.
At the same time, geopolitical frictions over chip distribution have created another supply chain bottleneck, with access to chips increasingly constrained by export controls and regional tensions.
For Musk, whose companies depend heavily on semiconductor chips, these uncertainties in control become a direct operational constraint that could cripple his aggressive push for AI dominance.
Rather than relying on systems whose availability can shift beyond his control, Musk is building the underlying AI infrastructure to power his companies’ AI needs. TeraFab, in that context, reads less like a routine business expansion and more like a lifesaving insulation.
Related: Anthropic’s SpaceX compute deal shows how quickly the AI infrastructure race is expanding beyond models and into chips, data centers, and raw compute.