Tesla, SpaceX Pick Texas Site for Musk’s $16.8B Chip Plant

A Site Change for the Largest Building on Earth

Musk first unveiled Terafab in March at Austin’s Seaholm Historic Power Plant, pitching it as a joint venture between Tesla, SpaceX, and xAI, the AI startup SpaceX absorbed in an all-stock deal earlier this year (with Musk serving as chief executive of all three companies). That original plan floated Austin’s Giga Texas campus as the likely build site, with an early cost estimate of $20 billion to $25 billion.

This week, Tesla and SpaceX formally confirmed the project is instead heading to Grimes County, Texas, north of Houston, with an initial construction investment of $16.8 billion. Company filings suggest the total cost across multiple build-out phases could climb as high as $119 billion.

Musk has described the facility as “the largest and most valuable building on Earth by far,” a claim that is not far-fetched, given that the building is set to house more than 100 million square feet of manufacturing space. It would be roughly 10 times larger than Tesla’s existing Gigafactory Texas, integrating chip design, fabrication, packaging, and testing at a single site.

Built to Feed an AI Compute Race

Terafab’s purpose is narrower than its size suggests, i.e. producing advanced chips for artificial intelligence (AI) workloads across Musk’s companies. The plant is designed to reach roughly 1 terawatt of AI compute output per year, manufacturing about 1 billion full-reticle chip equivalents annually, each capable of roughly 1 kilowatt of compute (a figure that does not currently exist anywhere in the chip industry).

Those chips are earmarked for edge computing and inference tasks across Tesla’s Optimus humanoid robots and its Cybercab autonomous vehicles, as well as higher-power chips built for SpaceX’s ambitions in orbital data centers. Bitcoin.com News reported last month that Musk has argued space is “the only way to scale” artificial intelligence, as SpaceX targets 1 gigawatt of compute capacity in orbit by 2027.

Lastly, it bears mentioning that Intel joined the project as a contributing partner earlier this year, contributing to a facility that will create at least 3,000 jobs across Grimes and neighboring Brazos County. SpaceX has committed to drawing water from the Gibbons Creek Reservoir rather than competing with the surrounding region for groundwater (another issue that has drawn scrutiny for other large U.S. data center and chip projects).

Musk’s Bitcoin-Heavy Balance Sheets

The Terafab announcement lands as both Tesla and SpaceX continue to hold sizable bitcoin (BTC) treasuries, a detail that keeps Musk’s ventures on the radar of crypto markets even when the news itself is about chips rather than coins. SpaceX holds 18,712 BTC, worth roughly $1.29 billion, while Tesla holds another 11,509 BTC, together making Musk’s companies among the largest corporate bitcoin holders in the United States.

That said, earlier this week SpaceX’s bitcoin stash shed roughly $540 million in value even as the company’s core launch business topped forecasts. A project on the scale of the Terafab, funded in part by two companies still carrying meaningful bitcoin exposure, shows just how tightly Musk’s AI ambitions and his crypto holdings have become intertwined, even if the two rarely make headlines together.

Neither Tesla nor SpaceX has said whether Terafab’s construction budget will draw on their bitcoin holdings directly, and both companies have historically treated their BTC treasuries as long-term balance sheet assets rather than a funding source for operating expenses. Still, the sheer size of the $16.8 billion initial commitment, with billions more potentially following in later phases, means investors will likely scrutinize how Tesla and SpaceX plan to finance Terafab without disrupting their existing crypto and cash positions.

Construction on the Terafab is expected to begin in the coming months, with Tesla and SpaceX not claiming that the plant is critical for an AI compute buildout that both companies argue current global chip manufacturing capacity cannot support.