Key Takeaways
- Wedbush’s Daniel Ives maintained his Buy recommendation with a $600 price objective on Tesla, suggesting approximately 57% potential upside
- Elon Musk revealed Terafab: a dual chip manufacturing complex in Austin, Texas, developed through collaboration between Tesla, SpaceX, and xAI
- The first facility will supply chips for Tesla’s electric vehicles and Optimus robotics; the second focuses on space-based AI infrastructure
- Ives views Terafab as the “initial move” toward a Tesla-SpaceX combination he anticipates “probably in 2027”
- Barclays’ Dan Levy maintained a more conservative stance, retaining an Equalweight designation and $360 price objective
Wedbush’s Daniel Ives continues to champion his optimistic Tesla outlook, maintaining a Buy recommendation and industry-leading $600 price objective after CEO Elon Musk revealed plans for an ambitious semiconductor manufacturing initiative dubbed Terafab.
Dan Ives in new $TSLA note:
“We believe this (Terafab project) is the first step to ultimately what will be Tesla and SpaceX combining forces in a merger likely in 2027. While the timeline for this project is uncertain, this will accelerate the company’s ambitious AI path which… pic.twitter.com/s9fxIqWgF4
— Sawyer Merritt (@SawyerMerritt) March 24, 2026
During a Saturday evening presentation at Austin’s historic Seaholm Power Plant, Musk introduced the Terafab vision, with Texas Governor Greg Abbott present. This initiative represents a collaborative effort among Tesla, SpaceX, and xAI — the entity that SpaceX absorbed through an all-equity transaction this past February.
The strategy encompasses constructing two semiconductor fabrication plants in Austin. The first will manufacture processors for Tesla’s battery-electric vehicles and Optimus robotic systems. The second facility is engineered for artificial intelligence computational centers, encompassing orbital applications.
Operating at maximum capacity, Tesla projects the installation could equal approximately 70% of TSMC’s present worldwide manufacturing volume. Musk aims to achieve 1 terawatt of yearly capacity — essentially doubling America’s current semiconductor production.
Development centers on two processor architectures. The AI5 represents a ground-based inference processor for Tesla’s Full Self-Driving technology, Cybercab autonomous taxi, and Optimus. Tesla asserts it provides a 50-fold performance enhancement compared to the existing AI4 processor. The D3 is a radiation-resistant processor engineered for SpaceX’s satellite network in orbit.
Musk indicated 80% of Terafab’s manufacturing would support space-oriented applications, with the remaining 20% dedicated to ground-based implementations.
Early projections establish 100,000 wafer starts monthly, expanding to one million at peak operations. The complex would generate between 100 and 200 billion specialized AI and memory processors annually using 2-nanometer manufacturing processes.
Tesla’s Rationale for In-House Chip Manufacturing
Musk explained that existing suppliers — Samsung, TSMC, and Micron — cannot scale rapidly enough to meet demand. “There’s a ceiling to how quickly they’re willing to expand. That ceiling falls short of our requirements,” he stated.
Ives reinforced this perspective, noting these suppliers “cannot satisfy upcoming demand.” He characterized Terafab as a vertical integration strategy that unifies chip architecture, manufacturing, memory creation, and assembly within a single operation — an unprecedented achievement at this magnitude in the semiconductor industry.
Tesla’s Chief Financial Officer acknowledged the projected $20–25 billion investment hasn’t been incorporated into the company’s 2026 capital spending blueprint, which already surpasses $20 billion. Construction commencement dates remain unannounced.
Limited-scale manufacturing of the AI5 processor is anticipated by late 2026, with mass production scheduled for 2027 — although Tesla had previously postponed the AI5 to mid-2027 prior to the Terafab disclosure.
Skepticism Remains Among Some Analysts
Barclays’ Dan Levy preserved his Equalweight assessment and $360 valuation, cautioning the undertaking might demand expenditures “many multiples” beyond even his $50 billion optimistic scenario.
Levy highlighted that Barclays projects Tesla’s 2026 free cash flow at negative $3 billion before accounting for any Terafab capital allocation.
Ives additionally interprets Terafab as the preliminary action toward a Tesla-SpaceX consolidation “probably in 2027.” He initially proposed this concept in February, forecasting it might occur “within the next 12 to 18 months.”
Wall Street’s collective perspective on Tesla remains divided. The equity maintains a Hold consensus rating on TipRanks, reflecting 13 Buy ratings, 11 Hold ratings, and 7 Sell ratings. The mean price objective stands at $399.25 — indicating merely 4.2% appreciation potential from present trading levels. TSLA has declined 14.8% year-to-date.
SpaceX is independently reported to be preparing to submit its IPO documentation potentially this week, pursuing a public offering as early as June with a $1.25 trillion valuation target.
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