Tesla Inc. Is set to launch its “Terafab” project within the next week, a major initiative focused on developing artificial intelligence chips to power the company’s autonomous driving technology, according to statements made by company founder Elon Musk.
Musk revealed on March 22, 2026, that the Terafab project, aimed at producing AI chips, is expected to initiate operations in seven days. This move represents a significant step for Tesla as it seeks to scale its AI infrastructure and maintain control over a critical component of its future technology roadmap.
The company is currently designing its fifth-generation AI chip, known as AI5, specifically to drive its autonomous systems, including its Full Self-Driving software, Reuters reported.
Musk has previously indicated that Tesla may need to build its own large-scale chip manufacturing facility to meet anticipated demand. “Even when extrapolating the best-case scenario for chip production from our suppliers, it is still not enough,” Musk stated during last year’s annual shareholder meeting.
He further elaborated on the concept of a “Tesla terafab,” describing it as “like a giga, but much bigger.” Musk believes that establishing a massive chip factory is essential to achieving the company’s desired chip volume. “I don’t see any other way to reach the volume of chips we’re looking for. So I think we probably need to build a giant chip factory. It has to be done,” he explained.
The announcement comes as Tesla continues to pursue ambitious goals in artificial intelligence and artificial general intelligence (AGI). Earlier this month, Musk expressed confidence in Tesla’s AI and robotics efforts, suggesting the company could develop into a leading developer of AGI.
Musk stated that Tesla is likely to be among the companies that create AGI, and potentially the first to achieve it in a humanoid or “atom-forming” capacity. This ambition is driving the need for increased chip production capabilities.
Last month, Tesla began recruiting AI chip designers in South Korea to build high-performance AI chips, seeking engineers to help create what the company calls the world’s most advanced mass-produced AI chips. The move underscores Tesla’s commitment to in-house chip development and its desire to reduce reliance on external suppliers.
While Tesla has previously considered collaborations with semiconductor giants like Intel Corp, no formal agreements were reached. Currently, the company works with manufacturers including Taiwan Semiconductor Manufacturing Co., Ltd. And Samsung Electronics Co., for the production of its AI chips.
The Terafab project is a joint effort between Tesla, xAI, and SpaceX, with the factory planned to be located in Austin, Texas, according to reports. Tesla is planning for two types of chips to be produced at the facility, with a projected output capacity of up to 200 billion chips per year, and a production power of up to 200 gigawatts annually. The chips are expected to generate up to 1,000 gigawatts in space applications.
The $25 billion project, if realized, would represent a substantial investment in the semiconductor industry and a significant step towards Tesla’s long-term goals in autonomous driving, robotics, and space exploration. The scale of the project suggests Tesla is positioning itself to be a major player in the future of AI hardware.
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