Elon Musk has a bold plan for the chip future of Tesla (TSLA) and SpaceX (SPCX), even though he admits he doesn’t know how to make chips. On Oct. 10, speaking by livestream at the X Takeover event in Austin, he said his companies would “figure it out.” He argues that Tesla and SpaceX are unusually good at building their own custom factory equipment. On tours of rival chip plants, he said he saw little of it, which he believes gives his companies room to improve how chips are made. Earlier this month, he also said Tesla and SpaceX will build and run their Terafab chip complex themselves, with TSMC (TSM) possibly subleasing part of it.
The Price Tag Investors Should Watch
The ambition is huge. Terafab’s first phase in Grimes County, Texas, is set to cost about $16.8 billion. Filings suggest the full project could cost up to $119 billion over several phases. Musk’s reasoning comes down to control. Tesla currently gets its AI chips from Samsung and TSMC. As AI chip demand soars, analysts have noted it would be hard for Musk’s companies to get priority at TSMC.
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Here’s what I think investors should pay attention to. Terafab is a joint project between Tesla and SpaceX, but neither company has said how the cost will be split. This is where it gets tricky for Tesla. Its 2026 spending plan already exceeds $25 billion, including some chip-making investments, and free cash flow turned negative in Q2. At the same time, car sales, which bring in most of Tesla’s cash, are slipping, with Q3 deliveries down roughly 2% from a year ago. So if Tesla ends up paying a large share of Terafab, it would be funding a big part of Musk's learning curve, just as its main source of cash is weakening. To be fair, the chips could pay off. As I covered earlier, investors already value Tesla more for robots and self-driving than for cars, and both need huge numbers of AI chips. Tesla reports Q3 results on Oct. 21, and I’d watch for any update on how much of Terafab it plans to fund.
About Tesla Stock
Tesla designs and makes electric vehicles, including the Model 3, Model Y, and Cybertruck, along with energy storage and solar products. It’s also developing its own AI chips and Optimus humanoid robots and is building the Terafab chip complex with SpaceX. Founded in 2003, the company is headquartered in Austin, Texas.
Tesla’s stock is down about 19% so far this year, well behind the S&P 500’s ($SPX) 13% gain. The biggest blow came after its second-quarter report in July, when an earnings miss and a jump in spending sent shares sharply lower.
www.barchart.comQ3 Earnings Will Show What Comes After Cars
Tesla reported its second-quarter 2026 results on July 22. Revenue rose 26% to $28.2 billion, comfortably ahead of estimates. Adjusted EPS of $0.33, however, fell short of the roughly $0.50 analysts expected, as heavy spending on AI and new factories weighed on profits.
Tesla reports third-quarter results on Oct. 21. Third-quarter deliveries of 486,532 vehicles beat expectations, giving the stock a lift in early October. Even so, investors will likely focus less on cars and more on what comes next. That includes updates on Optimus production and the robotaxi rollout. Management has said spending will keep rising for the next two or three years as it builds out these projects.
What Do Analysts Expect for TSLA Stock?
Based on 40 Wall Street analysts, TSLA stock holds a “Moderate Buy” rating with a mean price target of $401.36, indicating 11% upside. The modest upside suggests Wall Street is still waiting to see whether Tesla's big bets on AI, robots, and chips start paying off.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.