Everything we know about Terafab, Elon Musk’s $20 billion AI project that will tie the fates of his two biggest companies

The new facility is expected to cost more than $20 billion, and production will be ramped up to produce 50 times more AI chips than all major companies produce in a year (1). It will also neighbor Tesla’s Gigafactory (2). Two types of chips will be produced: One for Tesla’s self-driving vehicles, robotaxis and its Optimus humanoid robots, and the other will be designed to withstand the conditions in space.

“In order to understand the universe, you must explore the universe,” he said to a small crowd in Austin, Texas. “And that’s the motivation to accelerate humanity’s future in understanding the universe and extending the light of consciousness to the stars.”

Though his lofty dream might sound like something out of a science fiction novel, it has real-life impacts for average Americans, including the prices for EV cars, energy infrastructure and even job markets.

Musk’s vision and the critics' pushback

The massive undertaking would require anywhere from $5 trillion to $13 trillion in capital spending, according to Bernstein analysts (3). That would involve investing in 140 to 360 new factories, capable of producing 50,000 chips per month, to reach Musk’s goal of 1 terawatt of computing power each year.

“This is really going to take things to the next level; a level probably people aren’t even contemplating right now,” Musk said. “We’re going to adjust the context by a few orders of magnitude here.”

Currently, suppliers Micron Technology, Samsung Electronics and Taiwan Semiconductor Manufacturing haven’t been able to meet Tesla or SpaceX’s demands, which is why he’s shifting to internal production.

“We either build the Terafab, or we don’t have the chips,” Musk said. “We need the chips. So, we’re going to build the Terafab.”

He’s not alone in the pursuit of increasing chip production. Nvidia announced its initiative to help build AI data centers in space, and Jeff Bezos has said orbital data centers could help with the limitations on electricity.

Bernstein senior analyst Stacy Rasgon and his team were skeptical about the goals.

“Mr. Musk has admittedly done more than one thing that naysayers have called impossible at the outset, so we wouldn’t necessarily count him out,” analysts, led by Rasgon, wrote, “That being said, a true Terafab feels like a stretch to us, especially if the current compute paradigm is followed.”