Barclays: TeraFab chip factory may significantly increase Tesla, Inc. (TSLA.US) capital expenditures. SpaceX and xAI will provide support.

Barclays states that Tesla, Inc.'s newly announced "TeraFab" semiconductor manufacturing facility is likely to result in the tech giant's capital expenditure significantly exceeding the $200 billion disclosed to investors earlier this year. However, the investment bank believes that the company may receive some support. Barclays analyst Dan Levy wrote in a report to clients: "It is obvious that our previously set 'optimistic scenario' capital expenditure target for TeraFab (over $500 billion) appears significantly low compared to the ambition conveyed by Tesla, Inc., with actual investment possibly higher by several times, and likely more than an order of magnitude. However, bullish investors seem to have prepared for this, as investing is necessary to win. It should be noted that we expect Tesla, Inc. to gradually build the facility in multiple stages and expand towards the 1 terawatt target. At the same time, we expect Tesla, Inc., as well as SpaceX and xAI, to provide funding support." Elon Musk previously announced the construction of TeraFab, one of the largest chip manufacturing facilities in history. This super factory, named "TeraFab," aims to achieve an annual computing power capacity of over 1 terawatt (1000 gigawatts), covering logic, storage, and advanced packaging, jointly launched by SpaceX, Tesla, Inc., and xAI. TeraFab is planned to have an annual production capacity of 100-200 billion AI and storage chips, equivalent to approximately 100,000 wafer starts per month, with a total investment estimated at $20 billion. The initial production chips will be AI5, planned for production in 2027, for use in Fully Self-Driving (FSD) systems, humanoid Siasun Robot&Automation Optimus, Cybercab driverless taxis, and data centers. Musk further revealed on social media that around 80% of the facility's capacity will be dedicated to the space sector, while the remaining 20% will be for ground applications. This is "one of the largest semiconductor manufacturing businesses ever planned by a private company," making Tesla, Inc. "one of the largest semiconductor manufacturers in the world" and eliminating its reliance on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, Samsung, or any external suppliers, controlling every layer of the AI stack from chips to software. It is also one of Tesla, Inc.'s largest capital investments, funded by Tesla, Inc.'s $44 billion cash reserves and backed by Musk's long-term AI vision. Musk stated: "We are very thankful for the existing supply chain, including Samsung, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, and other companies, and we hope they can expand quickly because we will buy all of their chips. I have already told them this, but there is a limit to how fast they can expand, which is far lower than what we need, so we have to build TeraFab." It is worth mentioning that at Tesla, Inc.'s annual shareholders' meeting in November 2025, Musk first mentioned the idea of building a chip factory. He stated that to support the continuous iteration of Tesla, Inc.'s Fully Self-Driving (FSD) software and the large-scale deployment of OptimusSiasun Robot&Automation, Tesla, Inc.'s demand for chips will reach 100-200 billion annually. Even if global wafer foundries expand production according to the most optimistic forecasts, their capacity will not meet Tesla, Inc.'s explosive demand for AI chips in the future, hence building a large wafer plant is "a must." Musk pointed out during a demonstration at a facility in Austin last Saturday: "Either we build Terafab, or we will have no chips available." The project will start with a smaller advanced manufacturing facility for designing and testing various chips, with plans to gradually expand into a larger operating system. The proposed wafer plant will produce two main types of chips: low-power processors for vehicles, Siasun Robot&Automation taxis, and humanoid Siasun Robot&Automation; and high-performance chips for space computing. Musk envisions eventually supporting large-scale computing capabilities both on the ground and in orbit, but did not provide a specific timetable.