Elon Musk has confirmed plans for a massive joint manufacturing facility in rural Texas, branded Terafab, designed to produce more than a terawatt of computing power annually.
Terafab is a joint venture between Tesla (NASDAQ: TSLA), SpaceX, and xAI, which merged into SpaceX in February 2026, and sits in Grimes County roughly an hour northwest of Houston.
The site occupies the former Gibbons Creek Reservoir property, previously used to cool a coal-fired power plant that was shuttered in 2018.
SpaceX says the facility will draw cooling water from that reservoir rather than local groundwater, a direct response to community concerns about data-center water consumption.
Musk first teased the project in March 2026 before formally confirming it alongside Tesla on August 6, 2026, with a confirmed footprint exceeding 100 million square feet of manufacturing space.
That footprint is roughly five times the size of the New Century Global Center in Chengdu, China, which currently holds the title of the largest building on Earth at 18.9 million square feet.
Musk described the facility on X as “the largest and most valuable building on Earth by far. And it will be stunningly beautiful.”
The project’s stated price tag has shifted considerably, with Musk initially floating a figure of $25 billion in March 2026 before Tesla and SpaceX confirmed a $16.8 billion first phase on August 6.
A SpaceX regulatory filing suggests total investment across multiple phases could eventually reach $119 billion, while Texas is contributing a $30 million Texas Enterprise Fund grant to support the effort.
Terafab has also filed eight tax-incentive applications with two local school districts under the state’s JETI program, seeking to freeze school property taxes at roughly 48% of appraised value for 10 years per phase.
Musk framed the facility’s manufacturing ambition as “the most epic chip-building effort, combining logic, memory, and advanced packaging all under one roof,” targeting output for Optimus robots, Cybercabs, and SpaceX’s space-based data centers.
Intel (NASDAQ: INTC) signed on to the project in April 2026, though the terms of that agreement remain vague, leaving the nature of Intel’s involvement largely undefined.
Tesla’s near-term chip supply is already covered through separate arrangements, including a $16.5 billion deal with Samsung for its next-generation AI6 chip and an ongoing relationship with TSMC (NYSE: TSM), making Terafab a longer-dated strategic bet.
SpaceX’s own S-1 filing for its June 2026 IPO described Terafab as only a “general framework,” with no binding commitments between Tesla and SpaceX, no finalized intellectual-property split, and no obligation for either company to continue participating.
The 1-terawatt output figure is a Musk-originated number linked to his space ambitions rather than a standard benchmark used within the semiconductor industry.
Residents at a heavily attended Grimes County public meeting held the night before the formal announcement raised concerns about tax breaks and transparency surrounding the project.
For investors, Terafab remains more of a thesis than a concrete balance-sheet item, with Tesla shares already down 27.17% year-to-date amid a capital expenditure surge that pushed Q2 2026 free cash flow to negative $1.09 billion.
Whether the terawatt-scale compute facility materializes as described is expected to be one of the defining questions for Tesla and SpaceX over the next 18 months.
