1 Terawatt: Musk's Terafab Aims for Gigantic AI Chip Output by 2028

The proposed Terafab facility in Texas is designed to produce one terawatt of AI computing power annually, a volume that would place the single building within the top 20 global economies by GDP. This ambitious target, announced by Elon Musk during a live broadcast on October 20, represents a massive scaling of manufacturing capabilities. For context, the 20th largest economy on the list is Switzerland, with a gross domestic product of approximately $1.14 trillion. Musk stated that the commercial value of the advanced chips produced at this site could rival the economic output of an entire nation.

Musk, who serves as CEO for both Tesla and SpaceX, revealed that the project is a joint venture between the two companies. The primary manufacturing site is located in Gibbons Creek, Texas. The goal is to achieve volume production of chips by the third or fourth quarter of 2028. While this timeline is aggressive, Musk cautioned that it is "highly aspirational" and carries significant uncertainty, describing it as having "big error bars." He emphasized the need for speed to meet these deadlines, noting the company's appreciation for suppliers who are accelerating deliveries.

To support this rapid ramp-up, Musk confirmed that critical semiconductor equipment suppliers, including ASML, have expedited shipments for Terafab. ASML is the sole commercial provider of the extreme ultraviolet (EUV) lithography systems required for leading-edge chip production. Each of these systems costs approximately $400 million. Unofficial reports suggest the first EUV tool was slated for delivery in mid-2027, though it is not yet clear if this aligns with the expedited schedule Musk referenced. The facility will utilize Intel’s 14A manufacturing node technology, with Intel officially joining the venture in April 2026 to co-develop and refactor the silicon fabrication processes.

Beyond the Texas facility, SpaceX plans to manufacture its first experimental test chip at its research fabrication facility in Austin, Texas, around the second quarter of 2027. This step is part of a broader strategy to mitigate future shortfalls of cutting-edge AI processors from external foundries such as TSMC. The chips produced at Terafab are intended to power Musk’s xAI clusters, Tesla’s self-driving vehicles, Optimus humanoid robots, and SpaceX’s orbital AI data centers, in addition to supplying the broader AI industry.

In related developments, Musk outlined near-term computing ambitions for his AI enterprises. He expects the companies to have between 2.5 and 3 gigawatts of computing capacity active by the end of 2026. He expressed high confidence in adding an incremental 10 gigawatts in 2027, stating he would be "surprised" if the total did not reach 13 gigawatts by the end of that year. To achieve this, SpaceX and xAI are aggressively procuring next-generation NVIDIA architecture, with plans to bring a 440,000-GPU Nvidia "Vera Rubin" training cluster online by the end of the second quarter of 2027.

The scale of Terafab’s 1 terawatt ambition has drawn scrutiny from industry experts. Research firm Gartner estimates that total global AI-optimized data center capacity is roughly 44 gigawatts as of late 2026. This means Terafab’s planned annual output is equivalent to 4.4% of the entire current global capacity. While global AI computing capacity has grown by roughly 3.3 to 3.4 times per year since 2022, according to EpochAI, the jump to a single facility producing one terawatt remains a significant leap compared to existing infrastructure like the 10 gigawatt Project Stargate or Meta’s 5 gigawatt Hyperion, both of which are expected to reach full capacity in the 2030s.

The project requires a vast network of suppliers to provide front-end processing, metrology, and process control machinery. In addition to ASML and Intel, key partners include American manufacturers Applied Materials, Lam Research, and KLA Corporation, as well as Japan’s Tokyo Electron. Tesla and SpaceX are also in negotiations with approximately 10 South Korean equipment makers. These include Hanmi Semiconductor, known for advanced packaging equipment, and HPSP, a high-pressure hydrogen annealing equipment manufacturer, along with firms providing specialized piping and process valves. The facility aims to fabricate logic, memory, and advanced packaging architectures in one location, creating a vertically integrated manufacturing chain.

Despite the aggressive timelines and supply chain mobilization, questions remain about the feasibility of the 1 terawatt target. The sheer volume of equipment required, particularly the EUV lithography systems, poses logistical challenges. With ASML maintaining a consistent backlog of orders, the expediting of shipments represents a notable shift in the supply chain. The success of Terafab will depend on the seamless integration of these global suppliers and the ability to scale production from experimental test chips in Austin to full volume manufacturing in Gibbons Creek within just a few years.