Musk's Large-Scale Chip Production Plan Bets on Space Computing Power Competition

American entrepreneur Elon Musk recently announced the launch of a chip manufacturing project called “Terafab” to meet the huge market demand driven by the synergy of artificial intelligence and space exploration industries. Its production scale is expected to surpass the combined output of existing chip giants.

According to AFP, Musk stated that the Terafab manufacturing facility will be located near Austin, Texas, aiming to produce chips with an annual computing capacity of 1 TW.

Musk also said that the project will be jointly promoted by his electric vehicle company Tesla and space exploration company SpaceX.

He did not disclose the initial investment amount for the project. Previously, US media reported that the investment scale would be between $20 billion and $25 billion.

Although Musk lacks experience in semiconductor manufacturing, he explained that the reason for advancing the Terafab project is that Tesla and SpaceX’s demand for computing power is expected to far exceed the capacity of global chip suppliers.

“We are very grateful to the existing supply chain, including Samsung, TSMC, and others. We hope they can expand capacity quickly, and we will purchase all chips they produce. I have expressed this idea to them, but their capacity expansion speed has a limit, and it is far below our expectations, so we need to build Terafab,” Musk said.

Musk stated that the new “Advanced Technology Semiconductor Manufacturing Plant” in Austin will have the capability to design, manufacture, test, and improve each chip.

Musk has previously made high-profile moves to apply artificial intelligence technology to space industries, promoting leapfrog development in space exploration, and announced that SpaceX would acquire his AI company xAI. In this deal, SpaceX is valued at $1 trillion, and xAI at $250 billion.

Reuters quoted supporters of the merger, saying that acquiring xAI will help SpaceX advance its plan to build data centers in space. As AI development drives a surge in computing power demand, Musk believes space facilities are more energy-efficient than those on Earth. Regarding how Musk plans to fund the massive costs of building space data centers, Bloomberg previously reported that SpaceX is considering an IPO as early as June this year, raising up to $50 billion. The Wall Street Journal also reported that SpaceX might create the largest IPO in US stock market history.

Industry experts believe Musk is building his “Interstellar AI” empire. SpaceX has applied to the US Federal Communications Commission to deploy a system of 1 million satellites in low Earth orbit to create an on-orbit data center network to meet high-performance computing needs such as AI.

“Deploying AI in space is the cheapest way,” Musk said recently at the World Economic Forum 2026 annual meeting in Davos, Switzerland. He also claimed that deploying AI data centers in space could become a reality within “two, at most three years.”

CNN commented that this acquisition indicates that xAI has a funding need in the rapidly growing AI field and highlights the importance of AI technology for future space exploration.

Additionally, the latest Terafab plan shows that the project aims to produce chips capable of supporting 100 GW to 200 GW of computing power on Earth annually, as well as chips supporting 1 TW of computing power in space.