Tesla (TSLA) Shares Gain as Musk Announces Terafab Chip Plant to Commence March 21

TLDR

• Elon Musk revealed the Terafab project will launch in seven days—a chip manufacturing facility at Tesla’s Austin Gigafactory
• The facility is intended to counter a possible chip shortage that Musk believes will restrict Tesla’s growth over the next 3–4 years
• Tesla’s long-term Optimus robot goal could necessitate more than 200 million chips annually—50 times its current demand
• Morgan Stanley analyst Andrew Percoco projects the fab might cost $35 billion to $40 billion and start producing chips by 2028
• Musk pointed to geopolitical risks as a major factor for establishing domestic chip production capacity

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(SeaPRwire) –   Tesla’s stock climbed 0.6% in early Wednesday trading to $401.75 following CEO Elon Musk’s confirmation that the company’s “Terafab” chip factory will open on March 21 at its Austin, Texas Gigafactory.

Tesla, Inc., TSLA

Musk initially teased the project during a January 2026 investor call and confirmed the Austin site in a March 14 post on X. The facility will be located within Tesla’s extensive 2,500-acre Gigafactory Texas campus.

The AI industry is about to run out of chips. The world’s largest foundries are maxed out and the demand curve is still going vertical.

Tesla’s TeraFab is a bet on a solution no other company in the world has been ambitious enough to try…. build the chips yourself

Quick math… https://t.co/EXMHu5GYbC pic.twitter.com/31Ln43JLiO

— Josh Kale (@JoshKale) March 14, 2026

The main reason is straightforward: Musk believes Tesla will face a chip shortage. “When I look ahead and ask what’s the limiting factor for Tesla’s growth in 3 or 4 years, I think it’s actually chip production,” he told investors in January.

He also highlighted memory and AI logic capacity as possible constraints. “Do we have enough AI logic, memory, and RAM for our volume?” Musk asked during the call.

Why Tesla Is Building Its Own Chips

Morgan Stanley analyst Andrew Percoco broke down the figures. If Tesla reaches its long-term target of 100 million-plus Optimus humanoid robots per year, it would need over 200 million chips annually—more than 50 times its current chip demand across vehicles and robotaxis.

Percoco noted Tesla’s choice to build internal chip capacity stems from two factors: geopolitical worries and the Optimus program. Management warned that AI compute could become a bottleneck in 3–4 years.

Musk was straightforward about the geopolitical aspect. He stated the Terafab must include “domestic logic, memory, and packaging” to guard against supply chain risks. “I think people might be underestimating some geopolitical risks,” he said.

Constructing a fab is neither inexpensive nor fast. For example, Micron’s Boise memory chip plant broke ground in 2022 and won’t start producing chips until 2027.

Cost and Scale of the Project

Percoco projects Tesla could spend $35 billion to $40 billion on its chip fab capacity. Even in a best-case scenario, he says chips won’t be ready until 2028.

That’s a departure from Tesla’s usual capital expenditures. The company typically spends under $10 billion yearly on plants and equipment, though it plans to spend $20 billion in 2026 to expand its robotics efforts.

Percoco described the fab as a “Herculean task” and mentioned Tesla might partner with existing chipmakers instead of proceeding independently. He rates Tesla stock as Hold with a $415 price target.

Tesla’s stock entered Wednesday’s trading down 11% year-to-date but up 77% over the past year. S&P 500 and Dow Jones futures were both slightly higher that day.

The Terafab is scheduled to officially launch on March 21.