Terafab is Elon Musk's plan to build one of the world's largest chip-making complexes. Tesla (TSLA Quick QuoteTSLA - Free Report) and SpaceX (SPCX Quick QuoteSPCX - Free Report) have committed an initial $16.8 billion to the project, which is planned for Grimes County, TX, and would cover more than 100 million square feet.The vertically integrated facility is designed to handle chip manufacturing, packaging, and testing all under one roof. Terafab is expected to start manufacturing chips by 2029.

Musk estimates that Tesla and SpaceX will need over one terawatt of AI computing power every year, far more than today's global chip output can supply. The chips will mostly be built for edge computing and inference. They would power Tesla's Optimus robots and Cybercabs, along with high-performance processors for SpaceX's planned space-based data centers.

INTC In, TSMC Out

The one chipmaker firmly tied to Terafab is Intel Corp. (INTC Quick QuoteINTC - Free Report) . It joined in April, committing to design, make and package chips for the project, and Musk has said the plant will use Intel's next-generation 14A process.

The stakes are very different for each side. Intel's foundry business has lost more than $10 billion at the operating level in 2025, so a customer with Musk's appetite for computing is quite beneficial for its turnaround. For Musk, though, Intel is just one option among several.

Taiwan Semiconductor (TSM Quick QuoteTSM - Free Report) was the other name in play. Recent reports suggested that TSMC might help run Terafab's Texas plants, possibly using Terafab as an anchor customer for a new facility. On paper, this made sense, since TSMC is the global leader in advanced chipmaking and could have cut both the timeline and the technical risk.

But Musk shut that speculation down on X yesterday, writing: “No, we will build and run the fab. Let there be ZERO doubt about that." Tesla and SpaceX will build and operate Terafab themselves. At most, TSMC may be given a leased space inside the complex.

TSMC is already the world's leading chipmaker and doesn't really need Terafab for growth. If anything, Terafab needs TSMC's proven fab-running experience more than TSMC needs Terafab.

5 Ways to Play the Terafab Buildout

Terafab is a bet on capacity, and capacity has to be built before it can be used. Whatever the final mix of technology partners, a fab of this size needs equipment, materials, power, and packaging long before the first chip comes out. For investors, that points to the companies supplying the buildout, whose revenues depend on construction and volume than on Terafab's final success. Those companies already serve the broader AI chip boom, so Terafab could add to their demand.

Here are five ways to position for it.

Chip equipment makers: Every fab needs machines to print, etch, and inspect chips. Companies like ASML Holding, Applied Materials, Lam Research and KLA Corp sell those tools. A complex of more than 100 million square feet means heavy equipment demand.

Packaging and testing: Terafab plans to package and test chips on-site, which highlights a fast-growing part of the supply chain. Companies like Amkor Technology and ASE Technology are a few key players in the packaging space, while Teradyne makes chip-testing equipment.

Materials and utilities: Fabs consume huge amounts of industrial gases, ultrapure water, and specialty chemicals. Suppliers such as Linde and Entegris earn money on volume, so such firms may benefit as production ramps up.

Power and electrical infrastructure: Chip plants are among the most power-hungry facilities built. Companies supplying grid equipment, cooling, and construction services, such as Eaton, Vertiv, Quanta Services and GE Vernova, could benefit from the buildout.

Semiconductor ETFs: If picking individual stocks feels risky, a semiconductor or equipment ETF, such as VanEck Semiconductor ETF or iShares Semiconductor ETF, spreads exposure across the industry and its suppliers, and could be an even safer and more diversified bet.