Elon Musk's twin companies are putting their money where their ambitious roadmap is. Tesla and SpaceX announced Thursday that Terafab, their jointly developed advanced chip factory, will rise in Grimes County, Texas, with an initial investment of $16.8 billion. The scale is staggering: more than 100 million square feet of manufacturing space, making it what Musk calls "the largest and most valuable building on Earth by far." Main Developments Terafab will serve as a vertically integrated semiconductor facility, housing manufacturing, packaging, and testing of advanced logic and memory devices under one roof. SpaceX's website describes the goal as enabling "fast, recursive improvements" that accelerate the deployment of new compute. The factory will produce chips optimized for edge computing and inference—powering Tesla's Optimus robots and self-driving Cybercabs—alongside high-power chips for SpaceX's planned space-based data centers. The project targets at least 3,000 jobs from Grimes and neighboring Brazos County. To address environmental concerns, SpaceX committed to sourcing water from the local Gibbons Creek Reservoir rather than tapping into groundwater. The announcement follows a heavily attended county meeting on Wednesday where hundreds of residents voiced worries about millions in tax breaks and a perceived lack of transparency. Read also: OpenAI Fights Trade Secrets Suit by Pointing to Apple's Security Gaps Intel has confirmed it will contribute to the project, though it has remained cagey about the specifics of its involvement. SpaceX's own filings suggest the total investment could reach as much as $119 billion across a "multi-phase construction plan," though the company did not mention Terafab during its first earnings call earlier this week. The initial $16.8 billion is just the opening salvo. Background Terafab grows out of Musk's long-stated conviction that the future—millions of humanoid robots, fully autonomous robotaxis, and orbital data centers—demands computing power far beyond today's production rates. Current global chip supply, he argues, simply cannot support that vision. The factory is designed to bridge that gap, producing the specialized silicon that Tesla's vehicles and SpaceX's satellite networks will rely on. The location choice is no accident. Grimes County, situated outside Houston, offers proximity to SpaceX's existing operations and Texas's business-friendly climate. The tax incentives, however, have already sparked friction. Local residents packed a county meeting to question the scale of the breaks and the speed of the decision-making. Anderson-Shiro Consolidated Independent School District Superintendent Dr. Sarah Borowicz defended the agreement in a statement released by the Texas Governor's office, calling it a "defining moment" for the district. Why It Matters This isn't just another factory announcement. Terafab represents a bet that the compute bottleneck is the single biggest constraint on Musk's entire product roadmap. If the factory delivers, it could give Tesla and SpaceX a captive supply of cutting-edge chips, insulating them from global semiconductor shortages that have plagued automakers and tech firms alike. The scale—100 million square feet—would dwarf any existing fab, potentially reshaping the economics of chip production. For Texas, the project promises thousands of jobs and an economic boost, but it also raises questions about resource use, tax burdens, and whether local communities will see benefits proportional to the incentives they're granting. The tension between Musk's grand vision and local concerns will likely intensify as construction progresses. What's Next Construction timelines haven't been disclosed, but the multi-phase plan suggests years of building ahead. SpaceX's filings indicate the $119 billion figure could grow, and Intel's role will likely become clearer as the project moves forward. County officials and school districts will need to finalize the incentive agreements, while residents continue to push for transparency. For Musk, the next milestone is proving that Terafab can actually deliver chips at the pace his companies need—before competitors or market shifts change the calculus.