Tesla and SpaceX have committed $16.8 billion to the first phase of Terafab, a Texas chip plant, more than four times Tesla's trailing-12-month net income of $3.8 billion. Neither company has disclosed how the bill splits, and the project's own tax filings describe a multiphase plan that could reach $119 billion.
A $16.8 billion first phase
Tesla and SpaceX said on Aug. 6 that they will spend $16.8 billion on the first phase of Terafab, a semiconductor plant in Grimes County, Texas. Tesla's net income over the past 12 months was about $3.8 billion — so the opening commitment alone is more than four times what Tesla currently earns in a year.
The plant is designed to put logic, memory, packaging, and testing under one roof across more than 100 million square feet, about an hour northwest of Houston. Terafab will draw water from the Gibbons Creek Reservoir rather than local groundwater, the companies say.
Its chips are meant for Tesla's Optimus robots and its Cybercab, plus the high-power processors SpaceX wants for space-based data centers. Elon Musk is CEO of both companies, and Tesla said on X that it and SpaceX will need far more chips than current and future global production can supply.
Neither company says how the bill splits
The announcement attributes the $16.8 billion to the two companies jointly, and neither has disclosed an individual share. The first phase is only the start — the project has been described in SpaceX's Texas tax-incentive filings as a multiphase plan that could reach $119 billion.
Even a half share would be large against Tesla's current results. Tesla spent about $12.9 billion on capital expenditures over the past 12 months, generated $5.8 billion of free cash flow, and earned $3.8 billion of net income. An $8.4 billion share of phase one would equal about two-thirds of a full year's capital spending, layered on top of the vehicle programs and AI infrastructure that spending already covers.
The balance sheet can absorb it, earnings come later
Tesla finished the second quarter with about $43.5 billion of cash and investments on hand, so it can write the check. But the strain shows up first in cash flow and only later in earnings, as depreciation on a plant that size runs through an already thin profit base.
The chips Terafab is built to make are mostly for products that don't ship at scale yet — Optimus and Cybercab on Tesla's side, orbital data centers on SpaceX's. Tesla's market capitalization is about $1.3 trillion, roughly 340 times its trailing earnings, a valuation that already assumes those businesses arrive.
Source: The Motley Fool
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