Tesla (TSLA) CEO Elon Musk is hinting at a major update to the company’s semiconductor plans. During Tesla’s latest earnings call, Musk teased a “bigger announcement” tied to the company’s ambitious TeraFab project, which would involve building and operating a chip factory to meet Tesla’s growing demand and reduce reliance on outside suppliers. The comments followed stronger-than-expected Q4 results.
Claim 50% Off TipRanks Premium
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
It’s still unclear where in the U.S. the factory would be built or when it might come online.
Tesla’s Rising Demand for Chips
Tesla is increasingly betting its future on AI, self-driving technology, and robotics—areas that require massive amounts of semiconductors. Currently, the company relies on suppliers like Samsung Electronics (SSNLF) and Taiwan Semiconductor Manufacturing (TSM) to meet those needs.
However, Musk said current suppliers can’t meet Tesla’s growing chip demand. As a result, he said the company may need to build and operate its own chip factory, dubbed a TeraFab. The project would cost billions of dollars and mark a major step beyond Tesla’s core EV business.
Musk Flags Geopolitical Risks
Musk also said owning a chip factory would help He noted that these risks are often underestimated today, but could become a major issue in the coming years, making in-house production increasingly important. Owning its own chip factory would reduce reliance on overseas suppliers and help protect the company from disruptions like trade restrictions or regional conflicts.
Tesla already plans to spend more than $20 billion this year on capital investments tied to its existing factories. How additional projects—such as chip fab—would be funded is still an open question.
CFO Vaibhav Taneja said Tesla has over $44 billion in cash and investments, adding that the company expects to rely primarily on internal resources, while also keeping other funding options on the table.
Is Tesla a Good Share to Buy?
According to TipRanks, TSLA stock has received a Hold consensus rating, with 11 Buys, 11 Holds, and six Sells assigned in the last three months. The average price target for Tesla shares is $399.53, suggesting a potential downside of 7.4% from the current level.
