Barclays recently released a report pointing out that Tesla’s (TSLA) newly announced “TeraFab” semiconductor manufacturing facility is likely to result in capital expenditure significantly higher than the $20 billion level disclosed to investors earlier this year. However, the investment bank believes the company is expected to receive financial support from multiple sources.
Barclays analyst Dan Levy stated in the report that the previously set capital expenditure target of over $50 billion for TeraFab under an “optimistic scenario” was already significantly underestimated given Tesla’s ambitions, and the actual investment could be several times higher, possibly exceeding it by an order of magnitude or more. Bullish investors appear to have already prepared for this, as winning requires spending. The report also anticipates that Tesla will advance the construction in multiple phases, gradually expanding toward the 1-terawatt capacity target, with Tesla, SpaceX, and xAI all providing financial support.
Elon Musk previously announced the construction of TeraFab, one of the largest chip manufacturing factories in history. This megafactory aims to achieve an annual computing capacity of over 1 terawatt (1,000 gigawatts), covering logic, memory, and advanced packaging, and is being launched jointly by SpaceX, Tesla, and xAI. The planned annual production capacity is 100 billion to 200 billion AI and memory chips, equivalent to a monthly wafer input of approximately 100,000 wafers, with a total investment estimated at $20 billion.
The first mass-produced chip is the AI5, scheduled to enter production in 2027, for use in full self-driving, the Optimus humanoid robot, the Cybercab robotaxi, and data centers. Musk revealed that upon completion, about 80% of the factory’s capacity will be dedicated to space-related applications, with the remaining 20% for terrestrial uses. The project has been described as “one of the largest semiconductor manufacturing operations ever planned by a private company,” which will make Tesla one of the world’s largest semiconductor manufacturers, thereby eliminating reliance on TSMC, Samsung, or any external suppliers, and achieving full-stack control over the AI stack from chips to software.
Musk stated that while he appreciates existing supply chain partners and is willing to continue purchasing all their chips, suppliers are expanding at a pace far slower than Tesla’s demand, prompting the decision to build TeraFab in-house. The project will start with a relatively small advanced manufacturing facility for designing and testing various chips. As early as Tesla’s annual shareholder meeting in November 2025, Musk first proposed the concept of a chip factory. He noted that to support the iteration of full self-driving software and the large-scale deployment of Optimus robots, Tesla’s annual demand for chips would reach 100 billion to 200 billion units, and even under the most optimistic expansion scenarios for global wafer foundries, they would still fail to meet the explosive demand for its AI chips, making the construction of a large-scale in-house fab “imperative.”
