Musk's Terafab Pays Above-Market Prices for Chip Gear in TSLA's AI and Space Push

Elon Musk’s Terafab chip manufacturing venture is paying significantly above-market rates to secure critical equipment, analysts reported on May 31, 2026, signaling a high-stakes push by Tesla Inc. (TSLA) and SpaceX to bring semiconductor production in-house. The Texas-based project, announced in March 2026, aims to supply custom processors for TSLA’s electric vehicles, humanoid Optimus robots, and SpaceX’s planned orbital data centers. Musk has projected that annual humanoid robot output could exceed 1 billion units, far outstripping global chip supply. He thanked suppliers including Taiwan Semiconductor Manufacturing Co. (2330-TW) and Micron Technology (MU) but said their expansion plans were insufficient, forcing the self-built fab. Initial investment is $55 billion, with total costs potentially reaching $119 billion. ASML Holding NV (ASML) CEO Christophe Fouquet confirmed “very serious” talks with Musk, though EUV tool lead times remain a bottleneck. Analysts warned the project’s complexity is unprecedented, with one noting it is “more difficult than sending a rocket to Mars.” Bank of America has flagged high execution risk and long timelines as major hurdles.