Elon Musk reveals Tesla’s next big AI project

Elon Musk has revealed Tesla’s next big AI project, a massive in-house chip manufacturing project he’s calling “Terrafab.”

Speaking at Tesla’s 2025 Annual Shareholder Meeting, Musk said the company can no longer rely solely on outside suppliers like TSMC and Samsung to meet its exploding demand for AI chips.

With Tesla accelerating into robotics, autonomous driving, and AI systems, Musk warned that global chip supply may soon choke the company’s growth.

Musk has floated building a “gigantic chip fab” that would give Tesla full control over everything from AI chip design to large-scale production.

He confirmed Tesla has held exploratory talks with Intel, though he stressed no partnership has been finalised.

Musk also offered updates on Tesla’s next-generation AI processors. The upcoming AI5 chip, optimised for Tesla’s neural networks, reportedly uses one-third the power of Nvidia’s Blackwell at less than one-tenth the cost.

Moreover, the following model, AI6, is expected to nearly double performance within a year of AI5 entering production.

If Terrafab moves forward, Tesla is eyeing an initial output of 100,000 wafer starts per month, a figure Musk expects to scale up by as much as 10× as demand rises.