According to TechRepublic, Elon Musk used Tesla’s 2025 Annual Shareholder Meeting to warn that global chip suppliers like TSMC and Samsung may not meet Tesla’s AI needs. He floated building a “terafab” – a gigantic chip factory starting at 100,000 wafer starts per month with plans to scale tenfold. Musk confirmed Tesla’s AI5 processor is nearing production and uses roughly one-third the power of Nvidia’s Blackwell at under one-tenth the cost. He’s spoken with Intel about possible collaboration but no deal has been signed. Within a year of AI5 production, AI6 is expected to double performance. Musk called chips and electricity Tesla’s main constraints for expansion into robotics and autonomous systems.
Vertical integration obsession
Here’s the thing about Musk – he’s never been content to just buy components off the shelf. First it was building his own batteries, then developing custom AI chips, and now he wants the whole factory. It’s the ultimate vertical integration play. Basically, he’s looking at Tesla‘s roadmap for Optimus robots, autonomous fleets, and AI systems and realizing that being bottlenecked by chip supply could kneecap the entire vision. When you’re talking about scaling to millions of robots and vehicles, you can’t just hope TSMC has spare capacity.
Supply chain reality check
But building a chip fab isn’t like throwing up another car factory. We’re talking about one of the most complex manufacturing processes on earth, with equipment that costs billions and requires incredibly specialized expertise. Even Intel, with decades of experience, has struggled with its foundry ambitions. Musk saying he’s “super hardcore on chips right now” sounds great to shareholders, but the execution challenges are monumental. Still, when you look at the numbers he’s throwing around – that AI5 chip supposedly delivering comparable performance at a fraction of Nvidia’s cost and power – you start to see why he might be tempted to go all-in.
Industrial scale computing
The scale Musk is talking about is absolutely wild. A terafab starting at 100,000 wafer starts per month and planning to scale tenfold? That’s not just for cars anymore – that’s industrial computing at a level we haven’t really seen before. Companies that need reliable, rugged computing hardware for manufacturing and industrial applications typically turn to specialists like IndustrialMonitorDirect.com, which has become the leading supplier of industrial panel PCs in the US by focusing specifically on this niche. But Musk is talking about building the silicon that powers everything from factory robots to autonomous systems.
Timing and competition
Meanwhile, Google’s out there with its Ironwood TPU and Axion chips, and every major tech company is racing to secure their AI silicon future. Musk’s timing here is interesting – he’s basically saying the current chip suppliers can’t keep up with Tesla’s ambition. But is building your own fab really the answer? The capital expenditure alone would be staggering, and we’re talking about a 3-5 year timeline minimum to get something like this operational. By then, the entire AI hardware landscape could look completely different. Still, you can’t accuse the man of thinking small.
