The race to reach artificial general intelligence (AGI) is underway at full speed, and the biggest constraint for competitors is compute power.
A newly filed public notice in Grimes County, Texas, reveals the scale at which Elon Musk intends to break this bottleneck. TERAFAB, a joint venture between SpaceX and Tesla, will have a massive capital expenditure, with initial phases requiring $55 billion up front and a total projected investment of $119 billion.
Silicon Supply Chain
The TERAFAB initiative is a strategy to sever Tesla and SpaceX’s dependencies on external semiconductor foundries. Between Tesla's pursuit of unsupervised FSD, the rapid iteration of the Optimus humanoid robot, and SpaceX's ambitions to deploy orbital datacenters, the demand for custom silicon is growing rapidly.
The Grimes County documentation describes the proposed site as a multiphase, vertically integrated semiconductor manufacturing and advanced computing fabrication facility. By partnering with Intel to utilize its upcoming 14A manufacturing process, Tesla and SpaceX are moving to control the entire hardware stack.
Location
The specific location targeted in the public notice is the Gibbons Creek Reservoir. Semiconductor manufacturing and massive computing clusters require two key resources in significant quantities: power and water.
By targeting a location with immediate access to a major reservoir, the proposed "SpaceX Reinvestment Zone No. 1" secures the critical physical infrastructure necessary to eventually support up to a terawatt of computing output.
Leveraging Municipalities
While Grimes County has officially scheduled a public hearing for June 3 to consider a property tax abatement agreement, the deal is far from finalized. Musk recently confirmed on X that the Gibbons Creek location is merely one of several sites currently under consideration.
This is one of several locations under consideration for what will be the largest and most advanced chip fabrication facility in the world
— Elon Musk (@elonmusk) May 6, 2026
By stating that the $119 billion investment remains flexible, Musk is actively pitting local jurisdictions against one another. The strategy puts pressure on Grimes County commissioners to approve tax abatements and favorable zoning conditions, or risk being outbid by other locations.
