Elon Musk confirmed on October 3, 2026, that TSMC is in early-stage discussions with Terafab regarding chip manufacturing in Texas. Terafab, a joint venture between Tesla, SpaceX, and xAI, aims to build a vertically integrated semiconductor complex in Grimes County.
The project targets an annual output of approximately 1 terawatt to support AI computing needs for Optimus robots, Cybercab vehicles, SpaceX data centers, and xAI. The first phase of development involves an investment of approximately $16.8 billion and is expected to create at least 3,000 jobs.
Intel, which became Terafab’s first manufacturing partner in April 2026 using its 14A process technology, saw its shares drop 4% following the news of the TSMC talks. No agreements have been reached with TSMC, and Intel remains a partner.
Discussions with TSMC currently explore two potential operating models. In one, TSMC would operate the facility with Terafab as the anchor customer. In the other, TSMC would provide manufacturing expertise while other investors retain majority ownership of the site.
