SpaceX, Tesla, and Intel formalized a joint venture this week to build Terafab, a Texas-based AI chip fabrication facility with a first-phase capital commitment of $16.8 billion and a disclosed potential investment ceiling of $119 billion across future expansion phases. The partners filed the venture structure in Delaware on Tuesday and released site plans showing a 4.2 million square foot initial buildout in the Houston exurbs, adjacent to SpaceX's Starbase operations corridor.
The first phase finances three 300mm wafer lines optimized for 3nm and 2nm process nodes, with Intel providing lithography IP under a licensing agreement that grants SpaceX and Tesla co-ownership of mask designs for custom AI accelerators. Tesla contributes $6.1 billion of the initial capital, SpaceX $5.9 billion, and Intel $4.8 billion, with Intel taking operational control of the fabrication process and a 28% equity stake in the venture entity. The facility targets first silicon in Q4 2027 and volume production by mid-2028, contingent on CHIPS Act incentive disbursements that the consortium estimates at $2.3 billion for the initial phase.
The move solves two structural problems for Musk-controlled entities. SpaceX's Starlink constellation requires onboard compute for next-generation inter-satellite routing and phased-array beam steering, with current supplier TSMC unable to guarantee allocation at the scale Starlink Gen3 satellites demand. Tesla's inference workloads for Full Self-Driving have grown beyond the capacity of Dojo's current architecture, and the company is designing a hybrid cluster that pairs Dojo training with custom inference chips Terafab would produce. Intel gains a guaranteed anchor customer for its foundry services business, which posted a $7 billion operating loss in 2024, and access to Musk's capital without further diluting its balance sheet.
The $119 billion figure represents a 15-year buildout scenario the partners submitted to Texas state officials as part of property tax abatement negotiations. That envelope assumes twelve additional wafer fabs, a packaging facility, and a dedicated power substation, making Terafab comparable in scale to TSMC's Arizona complex. The venture has not disclosed financing sources beyond the first phase, though the structure permits external equity investors after the initial buildout reaches 70% utilization. Samsung and TSMC both expanded Arizona operations in 2024 after similar incentive packages, and Terafab's formal launch likely accelerates federal review of remaining CHIPS Act allocations.
Allocators should track three near-term events: Intel's Q1 2025 earnings call on April 24, where management will detail foundry-customer agreements; the Texas Comptroller's vote on Terafab's Chapter 313 tax abatement in late May; and the first equipment orders, expected in June, which will clarify whether ASML's extreme ultraviolet lithography tools are included in the initial phase. If ASML orders appear, the $16.8 billion is real capital deployment, not a negotiating anchor for subsidies.
The Houston site sits 11 miles from SpaceX's Starbase launch complex and shares a rail spur with Tesla's under-construction Gigafactory Texas expansion, making this less a diversification play than vertical integration of Musk's compute supply chain.