Elon Musk announced plans to initiate construction of a massive chip fabrication plant, dubbed “Terafab,” in Austin, Texas, according to statements made Friday. The project, a collaboration between Tesla, xAI and SpaceX, aims to produce chips specifically designed for robotics, artificial intelligence, and space applications.
Musk detailed the project on his social media platform X, stating the Terafab will be instrumental in securing the supply chain for these critical technologies. The announcement follows a recent $2 billion investment by Tesla into xAI in January, and SpaceX’s subsequent acquisition of xAI last month in an all-stock deal valuing the rocket maker at $1 trillion and xAI at $250 billion.
The Terafab initiative comes as Musk’s companies increasingly focus on vertically integrating their technology needs. The project will initially focus on producing chips for Tesla’s AI4 chip, which will be paired with xAI’s Nvidia-based server hardware, a combination Musk described as “cost-competitive.”
The joint project between Tesla and xAI, previously referred to as “Macrohard” or “Digital Optimus,” was unveiled earlier this month. Musk described Macrohard as a system capable of emulating the functions of software companies, pairing xAI’s Grok large language model with a Tesla-developed AI agent that processes real-time computer screen video and keyboard and mouse actions. The launch of similar AI systems, such as Anthropic’s Claude Cowork, has already prompted concern among software investors regarding potential disruption to established business models.
Musk admitted earlier this week that xAI “was not built right first” and requires a rebuild following the investments from Tesla and SpaceX. The Terafab project is intended to address these foundational issues by providing dedicated chip manufacturing capabilities.
xAI filed a trademark application for “Macrohard” in August 2025, according to records from the U.S. Patent and Trademark Office. The company, founded in March 2023 by Musk and a team of eleven researchers, currently has over 1,200 employees.
SpaceX’s acquisition of xAI was reportedly driven by the potential for orbital data centers, according to Musk. No specific timeline for the completion of the Terafab or the commencement of chip production has been announced.
