Elon Musk has announced plans for a new semiconductor manufacturing facility called Terafab. This project is a joint venture between Tesla, xAI, and SpaceX, which merged earlier this year. The announcement took place on Saturday at a former power plant and signals a major move to bring chip production in-house as part of Musk’s larger artificial intelligence goals.

The project is ambitious in scale. Tesla expects to sharply increase its spending on new equipment in 2026, not including any costs related to Terafab. The name ‘Terafab’ comes from Musk’s goal to produce enough chips to use a terawatt of electricity each year, which is about the same as running one billion Nvidia Blackwell-class chips annually.

The production schedule is fast compared to industry norms. Musk aims to start making semiconductors by late 2027 and reach full production in 2028. This timeline is quicker than the usual three years it takes for traditional semiconductor plants to go from construction to production.

The main reason for the project is the expected shortage of advanced chips needed for new AI uses, such as self-driving cars and robotics. Musk expects that 80% of Terafab’s chips will be used in space, where SpaceX plans to run AI computing tasks that are now done by large data centers on Earth. The facility will use two-nanometer node technology, which is the latest in chip design.

Tesla’s stock price, which is about 190 times its expected 2026 earnings, shows that investors believe the company will earn much more from AI-related businesses in the future. These include its robotaxi service, which started in Austin, Texas last June, and its Optimus humanoid robot program, now in its third version.

Terafab is another long-term project for Musk’s companies. Although it is not expected to boost revenue or profits soon, it supports the idea that Musk is bringing his companies closer together. This ongoing consolidation keeps investors interested in Tesla as a possible leader in AI across cars, space, and computing.