Tesla, SpaceX Pick Grimes County for $16.8B Terafab
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- Tesla and SpaceX confirmed Terafab will be built in Grimes County, Texas — about an hour northwest of Houston — with a $16.8 billion first phase and a finished footprint exceeding 100 million square feet, billed as the largest chip fab on the planet.
- Terafab will combine logic, memory, packaging, and testing under one roof, producing chips for Tesla's Optimus robots and Cybercabs and for SpaceX's planned orbital data centers, targeting "over 1 terawatt of compute per year" with at least 3,000 employees, most local hires.
- The $16.8 billion figure is down from the $25 billion Musk led with in March, and SpaceX's May S-1 filing called Terafab a "general framework" with no binding commitments, no finalized IP split, and no obligation for either company to keep participating.
- Tesla's near-term chip supply is already contracted elsewhere: Samsung's Taylor, Texas fab is producing the AI5 chip, Tesla signed a $16.5 billion deal with Samsung for AI6, and TSMC covers the rest — making Terafab a long-dated bet tied to Musk's orbital compute ambitions.
- The 100-million-square-foot claim is more than 10x TSMC's biggest gigafabs; TSMC is spending roughly $165 billion on six Arizona fabs that would still be a fraction of Terafab's stated footprint, and no existing fab outputs a terawatt of compute a year.
- The site sits on the Gibbons Creek Reservoir, which formerly cooled a coal-fired power plant shut down in 2018; SpaceX will pull water from the reservoir rather than local groundwater, addressing Grimes County concerns about water use and data-center sprawl.
Why it matters: Tesla is committing to a long-dated compute buildout while its car business has stopped growing and Samsung/TSMC already cover its near-term chips, and SpaceX's own S-1 simultaneously describes the project as non-binding — making the $16.8 billion headline less a contract than a pitch for Tesla shareholders funding a company increasingly defined by Musk's orbital AI ambitions.
