SpaceX and Tesla are teaming up on one of the largest semiconductor projects ever announced in the United States — and it won't be powered the way you might expect.
According to the Free Press Journal, the two Elon Musk companies will invest $16.8 billion in "Terafab," an advanced AI chip facility in Texas. The publication describes a 100-million-square-foot complex that will manufacture, package, and test AI chips.
The twist comes from TechCrunch, which reports that Terafab will depend on natural gas power plants rather than Tesla solar panels. That's a notable detail given that Tesla's business has long been built around solar energy and battery storage, and that Musk is a partner in the project through both companies.
The reason is practical, and it's the same math facing every large AI buildout right now: chip fabrication is extraordinarily energy-hungry and cannot tolerate interruptions. A fab needs steady, always-on electricity, and natural gas plants deliver power on demand in a way that solar, which generates only when the sun is out, does not without substantial storage.
For readers, the significance is less about one factory than about a pattern. The AI boom is colliding with the electrical grid, and companies racing to build capacity are increasingly reaching for fossil-fuel generation they can control and switch on quickly — even when those same companies sell clean-energy products.
It also signals ambition on the manufacturing side. Building domestic capacity to make, package, and test AI chips would put Musk's companies into a business currently dominated by a small number of overseas foundries.
Why it matters: the choice shows that the race to build AI infrastructure is now shaping real-world energy decisions, and speed is winning out over sustainability commitments.