SpaceX and Tesla choose Texas for AI chip manufacturing plant

A massive new chapter in American advanced manufacturing is set to unfold in rural Texas. Elon Musk's SpaceX and Tesla have announced a joint venture to build "Terafab," an AI semiconductor complex in Grimes County, with an initial investment of $16.8 billion. Slated to become the world's largest building at over 100 million square feet, the facility will produce chips for Musk's various enterprises. This comes as SpaceX also announced the "Starmind" orbital AI network with Nvidia, pushing the boundaries of AI infrastructure from the ground to space .

Terafab Texas: A Done Deal in Grimes County

Following months of speculation and community engagement, SpaceX representatives confirmed the Terafab project is finalized. At a packed public meeting in Anderson, Texas, Riley Trennell, a Terafab representative, stated, "Now with the JETI done, we are going to be moving nearly immediately to get going on the project" . The signing of the Jobs, Energy, Technology, and Innovation (JETI) agreements with local school districts and the Governor marks the official start, with civil work expected to commence within months .

Elon Musk took to X to declare, "Terafab Texas will be the largest and most valuable building on Earth by far," adding that it will be "stunningly beautiful" . The initial phase aims to create over 3,000 permanent jobs spanning engineering, food service, janitorial services, and security, alongside thousands of construction roles .

Investment, Incentives, and Economic Impact

The initial $16.8 billion investment is just the beginning. A May filing indicated total investment could reach $55 billion, with potential expansion to $119 billion . SpaceX plans to produce chips to meet an anticipated demand for over one terawatt of computing power . To support the project, Texas Governor Greg Abbott announced a $30 million Texas Enterprise Fund grant, stating the facility will "accelerate chip production in Texas at an unprecedented scale" .

SpaceX addressed local concerns directly, clarifying the tax agreement provides a 78% abatement, with the company paying Grimes County a fixed $20 million annually for 35 years—totaling $710 million—a figure exceeding Tesla's Travis County payment . This fixed structure, they argued, protects the county from potential tax protests .

Environmental Commitments and Community Engagement

Environmental impact was a key topic for residents. SpaceX committed that Terafab will not raise electric bills for ratepayers or deplete local water resources, specifically the Navasota River . They confirmed ownership of the Navasota River pumping station for stormwater diversion and will build their own natural gas-fired power plants, touted as the cleanest per megawatt, to avoid burdening the ERCOT grid . The facility will use closed-loop water recycling systems .

Starmind: AI in Orbit

Simultaneously, SpaceX and Nvidia unveiled "Starmind," an orbital AI data center network. Starmind satellites will be powered by Nvidia's Vera CPUs and Rubin GPUs, performing AI inference directly in orbit. "SpaceX has committed to using Nvidia GPUs exclusively because 'they are the best,'" Musk stated . Designed for applications like real-time disaster monitoring and autonomous navigation , Starmind represents a new frontier in distributed AI computing . Prototype testing for the Starmind AI1 satellite is scheduled for early 2027 .