VERTICAL INTEGRATION: Elon Musk launches TERAFAB: The $25B Tesla-SpaceXAI chip factory that will rewire the AI industry.

Elon Musk took the stage over the weekend at the defunct Seaholm Power Plant in Austin, Texas, to officially unveil TERAFAB, a $20-25 billion joint venture between Tesla, SpaceX, and xAI that he described as “the most epic chip building exercise in history by far.” The announcement marks the most ambitious infrastructure bet Musk has made since Gigafactory 1 in Sparks, Nevada, and it fuses three of his companies into a single, vertically integrated AI hardware machine for the first time.

TERAFAB is designed to consolidate every stage of semiconductor production under one roof, including chip design, lithography, fabrication, memory production, advanced packaging, and testing. At full capacity, the facility would scale to roughly 70% of the global output from the current world’s largest semiconductor foundry from Taiwan Semiconductor Manufacturing Company (TSMC).

Elon Musk’s stated goal is one terawatt of computing power annually, split between Tesla’s AI5 inference chips for vehicles and Optimus robots, and D3 chips built specifically for SpaceXAI’s orbital satellite constellation.

I once showed my wife a video of an Optimus robot in action — just performing household tasks on voice commands — and she immediately said, “We’ll sell one of the cars.”

The point is, there’s no way foundries like TSMC can fulfill SpaceX/xAI’s chip needs — certainly not at a reasonable cost — so in typical fashion, Elon will make his own.