Musk's Terafab lands $16.8bn first phase, far below earlier $55bn talk

Tesla and SpaceX confirmed on 6 August 2026 that they will build Terafab, a vertically integrated chip campus in Grimes County, Texas, with an opening investment of $16.8 billion — well short of the roughly $55 billion first phase floated in county filings back in May, out of a total programme that could reach $119 billion.

The site, about an hour north-west of Houston, is designed to handle logic, memory, packaging and testing in-house, producing two custom 2-nanometre chip families: one for Tesla's cars and Optimus humanoid robots, the other for SpaceX's orbital data-centre satellites. Plans call for more than 100 million square feet of manufacturing space and at least 3,000 jobs, on a campus Musk says will be more than twice the size of Tesla's 2,500-acre Austin site. Musk called it "the most epic chip-building effort" the companies have undertaken.

Texas is backing the project with its JETI programme, a $30 million Texas Enterprise Fund grant, and a 10-year 100% local tax abatement. In return, SpaceX will pay the county $20 million a year for 35 years, and must invest at least $5 billion by 2030 and create 1,800 full-time jobs by 2035. Water will come from the Gibbons Creek Reservoir, left idle since a coal plant there closed in 2018.

Musk first unveiled Terafab in March in Austin as a joint venture between Tesla, SpaceX and xAI. Tuesday's filing is the first time the companies have put a binding-sounding dollar figure on the project, though SpaceX itself describes the plan as a framework rather than a firm commitment: no construction start date or IP split between the two companies has been finalised, according to TechCrunch and the Austin American-Statesman.

The gap between May's $55 billion first-phase number and Tuesday's $16.8 billion figure matters more than the headline total. It suggests Musk's companies are sequencing capital carefully rather than front-loading a project whose scale — 100 million square feet, a potential $119 billion lifetime spend — dwarfs anything Tesla has built to date. Framing the announcement around a smaller, more digestible number lets Musk claim momentum on custom silicon for cars, robots and satellites without locking in the biggest commitment upfront.

Texas's incentive package skews heavily toward deferred and performance-linked payoffs: the tax abatement and annual county payments only pay off if SpaceX hits its 2030 and 2035 investment and jobs targets. For a state competing hard for chip fabs, that structure caps its downside if Terafab stalls. The bigger unresolved question is technical and commercial rather than financial: with SpaceX itself calling this a framework, not a construction date, the real test is whether Tesla and SpaceX can actually stand up 2nm production in-house, a capability neither company has demonstrated at scale.