**********Terafab: Tesla's proposed mega AI chip fab** [climaxing]
Key Questions
What is Terafab?
Terafab is Tesla's proposed mega AI chip fab announced by Elon Musk, involving a joint venture with SpaceX and xAI in Austin to build two chip factories. It aims to produce 2nm AI5 chips starting late 2026 for powering Dojo, FSD, and Optimus amid the Nvidia supply crunch. Samsung's Texas expansion serves as a backup with a $16.5B deal and $6.4B in CHIPS funding.
What are the estimated costs and allocation for Terafab?
The project is estimated at $20-40B, with a $25B midpoint, potentially leading to dilution concerns as noted by UBS. Around 70-80% of the compute will go to Optimus, Starship, and Dojo, described as FCF black holes, while 80% overall compute is allocated to SpaceX. Musk has called it a 'build or bust' effort after TSMC rejection.
What do analysts say about Terafab?
Microsoft flags $20B+ funding shortfalls and execution risks, while HSBC criticizes it as a distraction from EV challenges. UBS expresses dilution fears with a $421 fair value for bulls. Bears like HSBC reiterate a Reduce rating with a $131 target, highlighting massive downside potential.
Musk announces 'Herculean' Austin duo chip fabs JV w/SpaceX/xAI ($20-40B) for 2nm AI5 chips (late 2026) powering Dojo/FSD/Optimus amid Nvidia/Micron shortages; Samsung Texas $16.5B/CHIPS $6.4B backup, MS $20B shortfall risks, 70-80% to Optimus/Starship/Dojo FCF black hole, UBS dilution ($421 FV), Musk 'build or bust'. HSBC slams distraction.