Key facts
- SpaceX and Tesla will invest $16.8 billion in the Terafab AI chip manufacturing complex in Texas.
- SpaceX plans to power the facility with natural gas power plants and battery arrays, not solar.
- The project aims to produce advanced AI chips for data centers run by SpaceX and its xAI subsidiary.
- Elon Musk's companies have recently shown a strong reliance on natural gas for power.
- Grimes County, Texas, has provided SpaceX with a 100% tax abatement for the project.
SpaceX announced plans to construct natural gas power plants to supply electricity for its planned Terafab semiconductor factory in Grimes County, Texas. The facility, a joint venture with Tesla and Intel, is intended to produce advanced AI chips for data centers operated by SpaceX and its xAI subsidiary. Riley Trettel, who leads energy and data center development for SpaceX, stated that the company will provide its own power, including large battery arrays, for the project. This approach marks a departure from terrestrial solar power, despite Tesla's involvement as a solar developer. Elon Musk has recently favored natural gas, with xAI data centers in Memphis running almost exclusively on the fuel, and SpaceX planning to purchase $2.8 billion in gas turbines over the next three years. The Terafab project, with an initial estimated cost of $16.8 billion, aims to meet the significant computing power demands of SpaceX and Tesla's future initiatives, including robots and robotaxis. Grimes County has offered SpaceX a 100% tax abatement in exchange for substantial investment and job creation, with Texas also providing $30 million in incentives. The AI data center boom has led to a surge in proposals for new natural gas plants, increasing their costs by 66%. SpaceX's xAI subsidiary has faced lawsuits regarding the use of unpermitted natural gas turbines.