5 Questions About SpaceX’s Computer Chip Ambitions

rendering of chip processing board — (Image credit: Getty Images)

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SpaceX is going big with Terafab, which it says will be the largest chip-making plant in the world when completed. But it’s hard to know if Elon Musk’s extraordinarily ambitious semiconductor plans will work.

One thing is certain: Musk is serious about building it. SpaceX is dedicating nearly $17 billion for the initial phase of the advanced semiconductor manufacturing factory, and tens of billions more in spending is likely. When finished, the company says Terafab will span 100 million square feet, making it one of the largest manufacturing facilities in the world.

Within Terafab’s walls, SpaceX will manufacture, package and test advanced logic and memory chips. The reason for entering the market is based on Musk’s sky-high forecast of the chips needed for driverless cars, humanoid robots and orbital data centers for both SpaceX and Tesla.

SpaceX says its demand for chips will eventually be so astronomical — more than the current global supply — that it can’t rely on leading chipmaker Taiwan Semiconductor Manufacturing Co. for all its needs. Or Intel, which is working overtime to start a division that makes chips for outside companies, and which has partnered with SpaceX to help build Terafab.

"Elon has a proven track record of reimagining entire industries," said Intel’s CEO Lip-Bu Tan when the partnership was announced. "This is exactly what is needed in semiconductor manufacturing today."

Will chipmaking be reimagined by the world’s most dominant space company? The answer is unclear, but here are some of the early questions we’re pondering.

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1. Can SpaceX build a successful semiconductor fabrication plant?

Semiconductor manufacturing is incredibly costly and challenging. It pushes the limits of physics, chemistry and engineering. The clean rooms are up to 1,000 times cleaner than an operating room. The lithography machines needed to print chip patterns on silicon wafers cost hundreds of millions of dollars. There are specialty gases and chemicals, along with all sorts of automated machinery. The ecosystem involves thousands of suppliers around the globe.

And the economics don’t work unless the facility is running at full capacity, churning out finished wafers with a miniscule amount of defective chips. To add to the challenge, SpaceX wants to push the limits of current chip manufacturing, saying it will be the first to do so many of the processes under one roof. "The most epic chip-building effort in the world," says the company.

Musk says that eventually, a huge production volume will allow Terafab to test and develop new chip designs rapidly, calling the way current chipmakers operate "extremely conservative." He also wants to harness new physics and chip technologies, saying in a presentation, "We’re going to try a bunch of wild and crazy things."

2. How will Terafab distort the chip ecosystem?

SpaceX will become another big spender on chip equipment. The company needs advanced photolithography machinery from Dutch company ASML, pitting it against TSMC, Intel, Samsung and others. Plus, it will need to buy all sorts of other gear that goes into a leading-edge chip plant from Lam Research, Tokyo Electron, KLA Corporation and many other suppliers. Building a cutting-edge chip plant can already cost more than $30 billion and Terafab, with its scale and ambition, will cost far more.

SpaceX is also likely to poach top chip talent from other top companies. The U.S. chip sector already has a severe shortage of workers to operate chip plants. The massive project will take up lots of skilled construction labor as TSMC, Intel, Samsung and chip companies try to expand in the U.S. Over the long term, there’s the question of whether Terafab’s chip production could affect the sales of other chip leaders.

Musk’s viewpoint is that there will be an ongoing, huge shortage of chips compared with the exploding demand for AI compute. SpaceX says Terafab chips are solely for its own internal use, but one has to wonder if the company would ever consider selling its chips to outside customers. Or even making chips for customers. Plus, if SpaceX can eventually win more AI market share, that affects the chip market. Its AI competitors would need to buy fewer chips.

3. What kind of turmoil will SpaceX cause for chip stocks?

In the coming years, some investors may start monitoring SpaceX’s competitive threat to other chipmakers or even start worrying about a potential glut of chips. SpaceX wants other chipmakers to expand production as it makes plans to wean itself off outside chips. "While we are deeply appreciative of our current chip suppliers, and encourage them to expand production whenever possible, this looming gulf between supply and demand is at the core of Terafab’s necessity," according to the company’s latest update.

It wouldn’t take SpaceX completing the project or even making chips in high volumes to affect other chip stocks. Hitting early milestones or even building a promising narrative around Terafab could spark stock gyrations. Intel’s partnership with Terafab could become an uncomfortable one in years to come if SpaceX starts to be a competitive threat. Consider that SpaceX’s long-term plans for Starlink to take on terrestrial wireless carriers have already hit telecom stocks, causing U.S. wireless carriers and tower firms to trade lower.

4. What does this mean for Nvidia?

Over the short term, not much. But SpaceX takes the long view, and that’s where things get interesting. As SpaceX pursues manufacturing its own chip designs, it could mean trying to move past Nvidia, at least in the very long term. For now, SpaceX is all-in on Nvidia chips, recently committing to the company’s AI chips for its orbital data centers. "We have decided to build exclusively on Nvidia, because we think the Vera Rubin architecture is the best architecture," Musk said during SpaceX's recent earnings call.

But over time, that relationship could get challenged if SpaceX somehow is able to make its own chips and become a dominant force in AI data centers, on Earth and in space. SpaceX’s investor prospectus underscored how it wants to keep all options on the table: "While Terafab is intended to expand our internal chip manufacturing capabilities and alleviate potential future AI chip shortages at SpaceX, particularly as we pursue orbital AI at scale, we expect to continue sourcing a significant portion of our compute hardware from third-party suppliers."

What is the timeline for Terafab?

While the initial construction has started, the time it will take to produce viable chips is anyone’s guess. And there’s a difference between just making chips and producing them economically at scale. It’s likely that SpaceX faces all sorts of technical challenges in coming years.

Here are some of the key dates up to today: SpaceX announced in March 2026 that it was building Terafab in collaboration with Tesla. The partnership with Intel was announced in April 2026, which will include Intel lending its manufacturing expertise to help with design, fabrication and packaging. The latest announcement about breaking ground on Terafab in Grimes, Texas, happened on August 6 and included an aerial shot of the futuristic-looking facility.

Other development timelines, milestones and spending haven’t been determined yet (or at least are not public). It’s likely SpaceX moves aggressively on this project and the timeline for initial production is faster than other chip plants built in the U.S. However, completing the full vision of Terafab would take many years, extending well into the 2030s.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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John Miley is a Senior Associate Editor at The Kiplinger Letter. He mainly covers AI, technology, telecom and education, but will jump on other business topics as needed. In his role, he provides timely forecasts about emerging technologies, business trends and government regulations. He also edits stories for the weekly publication and has written and edited email newsletters.

He holds a BA from Bates College and a master’s degree in magazine journalism from Northwestern University, where he specialized in business reporting. An avid runner and a former decathlete, he has written about fitness and competed in triathlons.