Musk Calls Terafab 'Terrifyingly Large' as Tesla and SpaceX Shares Fall 13% and 12.5% After Texas Election

Elon Musk used a Friday fireside chat at the Baron Investment Conference in New York to defend the biggest bet in his business empire. The project is Terafab, a joint Tesla-SpaceX chip manufacturing effort in Texas.

The timing is awkward. Between the Election Day close on Nov. 3 and the Nov. 5 close, Tesla shares fell 13.75%, from $398.50 to $343.69. SpaceX (NASDAQ: SPCX) fell 12.52%, from $141.31 to $123.62. That is roughly $457 billion in combined market value, according to 24/7 Wall St.'s tally. Neither company has commented on the drop, and no one has publicly tied it to a single cause.

What Terafab is, and what exists

Musk announced Terafab on March 21, 2026. The stated goal is a vertically integrated chip operation, supplying Tesla vehicles, Optimus robots and Cybercabs, plus hardware for SpaceX's planned space-based data centers.

Two pieces are in motion. A research fab, estimated at $3 billion, sits on the North Campus of Giga Texas near Austin. Tesla said it broke ground there in April.

The main production site is planned for Grimes County, Texas. Tesla said Aug. 6 that Terafab would go there. The companies put the initial investment at about $16.8 billion, with more than 100 million square feet of space and at least 3,000 jobs. Spectrum News reported in late September that the site had been significantly cleared after an August groundbreaking.

Intel signed on as a foundry partner April 7, targeting its 14A process node. Musk said Friday that TSMC confirmed discussions about a possible role last month.

The size claims

A viral X post Friday called Terafab "the largest building in human history." It is not a building yet. The Terafab website lists 100 million square feet for the finished site, against about 10 million for Giga Texas. That is roughly 10 times Giga Texas and about 15 times the Pentagon's 6.6 million square feet.

Musk has said Terafab will be 50 times the size of the Pentagon when complete. That would require about 330 million square feet, a figure the companies have not disclosed, TechRadar noted. Electrek reported that SpaceX's S-1 filing described Terafab only as a general framework.

What Musk told investors

Musk said the long-term target is 1 terawatt of AI chips a year, which he estimated at about 30 times global annual production in 2027. "It's terrifyingly large," he said. He added that "if it fails, it'll be crazy, and if it succeeds, it'll be audacious."

The research fab is meant to compress development cycles. "Something that would normally take a year, I think we may be able to reduce to a month," Musk said. Techniques that work would move to Grimes County.

He also projected that SpaceX, which acquired his AI company xAI earlier this year, is heading toward an annualized revenue rate above $100 billion by December 2026 and above $500 billion by December 2027. Those are Musk's forecasts, not reported results.

The Austin problem

According to 24/7 Wall St., Gina Hinojosa defeated Gov. Greg Abbott after campaigning to stop new data-center development and questioning state tax incentives for Musk's companies. She has not taken office and has implemented nothing.

She has taken one step: asking Texas Parks and Wildlife to pause talks on selling public land to SpaceX near Starbase. In a Nov. 5 television interview, she said data-center work should stop until protections for Texans are in place. Terafab includes a data-center component, so her position bears directly on it.

The same report says Musk spent at least $474 million on the midterms, including $224 million in Texas, and that Democrats won both houses of Congress. David Wagner, a portfolio manager at Aptus Capital Advisors, said a less friendly Congress could make it harder to combine Tesla and SpaceX. Special committees are reportedly weighing a merger, but no deal has been announced.

The balance sheets

SpaceX's five-year credit default swaps widened as much as 14.6 basis points on Nov. 5 to a record 284.3 basis points. Lenders are watching roughly $40 billion of AI equipment financing and about $38 billion of debt as of the end of September. SpaceX also held nearly $90 billion in cash and short-term investments, and the outlet called a default unlikely.

SpaceX's AI Solutions and Infrastructure segment produced $7.60 billion of $14.60 billion in third-quarter revenue, up 830% year over year. A slower data-center buildout would hit that segment directly.

Tesla's third-quarter revenue was $28.046 billion, down 0.17%. Operating income fell 55.79% to $718 million as spending rose on Optimus, self-driving software and AI compute.

The investment figures are estimates and initial commitments. Fab projects are known for delays and cost overruns, and Musk himself conceded the downside in his own words.

Musk's case is about control and speed: own the chips, tune them for your own software, spread the cost across two companies. Whether that case survives contact with a hostile statehouse is unsettled. Hinojosa has not yet taken office after her election win, and whether her data-center pause would reach the Grimes County site, or just future projects, is the question that determines how much of the $16.8 billion plan can proceed on its current schedule.