Elon Musk Unveils Terafab AI Chip Project

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1:27IBM. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, Carol, you made this point on the call earlier today, Carol, that it seems like Elon's been a little quiet lately. We've missed Elon. Did you? But you just have to log into X and then you'll, if you miss him, just log into X and look at what he's been posting. He's been busy. He has been busy. He said his TerraFab project is a grand plan to eventually manufacture his own ships for robotics, AI and space data centers will be built in Austin and jointly run by Tesla and SpaceX.

2:14Also breaking late Friday, a jury concluded that Musk defrauded investors when he disparaged the company back in 2022 in an effort to buy the social media platform for a lower price than his original$44 billion bid. All right, so let's get to it. Max Chafkin's in the house, someone who knows all things Elon. He's Bloomberg Businessweek senior reporter, co-host of the Everybody's Business podcast, also author of The Contrarian, Peter Thiel and Silicon Valley's Pursuit of Power. He's here in studio. It's like we go from nonstop Elon to not. And yet there are some things going on. Yeah, I mean, this is potentially a gigantic mega merger between SpaceX and X, a massive IPO.

2:52And this TerraFab deal that Tim is referencing, you know, it brings SpaceX and Tesla closer as well. So explain that. Go there. So what we heard over the weekend, Elon Musk had a big event in Austin. He loves to have these kind of nighttime party type launches. And it's often very speculative, I'll say. So the latest one of these is they're going to build a massive fab that's a chip factory in Austin for chips that he is going to send, SpaceX is going to send into data centers in space. So that would be a Tesla project with SpaceX, managing the data centers, bringing these companies much closer together than they even are, even though they do share, obviously, a CEO.

3:41Okay. Makes sense, kind of. Which part makes sense? I don't know. Are we trying to convince ourselves that this makes sense? They showed a rendering of a catapult lifting satellites from the moon into space. So it is very science fiction. I will say on Bloomberg Tech earlier today, Ed and Caroline spoke to Karen Franschke, the head of global private equity investments at Fidelity. It's an investor in SpaceX. She said, conceptually, it makes a ton of sense in the longer term to be thinking about data centers in space. The question, of course, becomes, is it economical? And frankly, what we've been watching for investors is Starship.

4:23So let's break down. I want to talk about data centers in space first, because I think a year ago, if you would have said that, you would have been laughed out of anywhere. But now more and more people are talking about this and the feasibility here. Still, I think people are like, wait a second, how does this work? Yeah. I mean, there is an extent to which people are talking about this in part because Elon Musk a few months back started saying, hey, I think this is a thing I'm going to do. And a lot of people who pay attention to AI follow what Elon Musk says. The thought process here is AI is growing very quickly.

4:57Lots of companies need data centers very quickly. You're also starting to see local opposition to data centers. I'm seeing politically this is becoming this went from being kind of like a clear cut jobs issue, I think, to an issue that now has some nuance where you're starting to see even Republican politicians, even President Trump in certain ways saying we need to build these things, but we can't have them driving up the electricity price and so on. So Elon Musk's pitch here is, hey, I've got the perfect location for your data center. It's outer space where the sun is always shining. And, of course, he as as you.

5:32I will bring your data center to space for you on my rocket. Plenty of room and space. And, of course, Elon Musk has a sort of pseudo-monopoly in the launch business. Now, his rockets, the rockets that launch every day, the Falcon 9 rockets, do not carry, you know, would not be big enough for this plan. And that's where Starship, this in-development rocket that he is trying to build, would come in. I would say that the development of Starship has been, you know, uneven. They have yet to sort of hit the milestones that they're talking about. They are a long way from achieving this project. We laugh, but it is Elon.

6:11And he does do things that nobody could have imagined. Aren't there latency issues still with satellite communication and how quickly you can get that data? Well, you know, I'm not an expert in the physics of data centers. What I will say is— Well, Starlink is amazing. We know that. Yeah, and works well. Okay, if you're looking for challenges here, I don't think the latency issue is the big one. The big one is that Elon Musk is proposing to become the world's largest manufacturer of semiconductor chips by a factor of, I don't know, like 10 or 20 or something. He's proposing to build the largest semiconductor plant in the world, in the history of the world, bigger than all the factories put together, and he has never made a single one of these chips.

6:58So this is a company with zero experience. Like this is there's a lot of things that would have to happen for this to become real. And and and yet, you know, Elon Musk is kind of a master at pointing way off in the future, trying to find big opportunities, opportunities that, of course, where there's where there's maybe a political constituency. Again, talking about the the challenges of data centers and the fact that, yes, the AI industry is growing quickly. And also there are, you know, there are challenges at Tesla. This is a way for him to find growth categories at a time when the car business, the business that Tesla is actually in, has not been growing.

7:39I don't know. And they've sent Teslas to space, Carol. All I can think of is the month. They have. They have. There's a roadster up there. I know. I know. Okay. Or a Tesla. It's working well, right? It's just chilling. It's just chilling. It's just chilling. It's just orbiting, yeah. Can we go back to something that happened on Friday? And this, she's smiling. A jury saying basically Elon Musk defrauded Twitter investors when he disparaged the company back in 2022 in an effort to buy it for a lower price than the original$44 billion bid. Is that significant? Does it matter? The reporting here from Bloomberg and others is that this may end up being worth as much as a couple of billion dollars.

8:21Like that the losses that some shareholders incurred who sold their Twitter shares early would be, you know, again, in the hundreds of millions, even a couple billion dollars. Elon Musk, of course, is worth a lot more than that. And what I'll say is what I think what is most kind of interesting here is this is the first one of these cases he's lost. He's constantly getting into trouble for things he says on Twitter now X. And even a couple of these have gone to jury trials. And in general, jurors have sort of bought an argument that his lawyers have made, which is that Elon just says stuff. And he doesn't use Twitter like a normal CEO does.

9:02He just says what's on his mind. This one did not go that way. And I think part of the reason it didn't go that way was because Elon was tweeting stuff out, and then he was also at the same time pursuing a campaign in court to try to get out of the Twitter acquisition. So I think that kind of complicated what he was trying to do. And in the end, he tweeted something, which is that the deal was on hold, which was not true. The deal was not on hold because he had signed an agreement. It's not the first time that he's been in a situation where he's said something about a deal, potentially, I think back to the take private deal with Tesla many, many years ago.

9:44I mean, this was like, what, 2017 or something around then. But I look at Rich Go on the Bloomberg Terminal. He's worth$641 billion. What, he pays a couple billion dollar fine. What are the implications of this? Like, what are the repercussions? There's going to have to be a whole process where investors who were harmed, you know, ask for damages and so on. So this is going to take some time. It's going to also be argued in court. Again, we're talking about potentially large amounts of money for a normal person, not necessarily large amounts of money for Elon. You know, it's probably worth saying this whole argument over, you know, Twitter was the Twitter and the bot problem, which this was at issue at this case.

10:29You know, it ended up not mattering much. Elon bought the company. He has now merged it with SpaceX, and its valuation has soared well beyond the original purchase price. So I don't know. It's one of these things where I guess the people who – the investors who sold are going to get some relief, although they probably would have been better off holding on to their shares. There's another story out there too that XAI, that's of course Elon Musk's company, sending engineers directly into the offices of prospective corporate clients in an attempt to claw business customers away from rivals OpenAI and Anthropic.

11:04Just normal business? Is there something unusual about this? Or I don't know. You know, it reminds me a little bit of the playbook followed by Palantir. Palantir famously uses these forward, quote unquote, forward deployed engineers in lieu of salespeople to sort of help with customer integrations. That has been a big issue with Palantir skeptics. They sort of see this as tantamount to a sales force that is not being accounted for as a sales force. So yeah, I mean, perhaps it raises some questions about the unit economics of what X is doing. On the other hand, this is a very competitive world.

11:41Like there are a handful of these large language model companies. They are all competing for the same big companies. It's not totally surprising that XAI would do this. I think if you're taking sort of a skeptical point of view, you say, well, I guess the product isn't selling itself very well because you're having to send these very, very valuable engineers into the field to kind of do something resembling a sales pitch there. Do we ever really know what data Elon Musk might have picked up from the government when he was head of Doge? I think we're going to spend a long time sorting out exactly what happened there.

12:17And there are continued cases and legal complaints and so on. And I think one of the issues in sorting this out is that AI algorithms, these large language models, they're not black boxes, but they're pretty close to it. It's hard to know exactly what data can leak into them in various ways. So I think this is going to be a thing that, frankly, we spend a couple of years, maybe even longer, talking about. And I would not be surprised if, you know, should Democrats retake the House or the Senate or both, that we may get some congressional hearings. We may have a political process. Come on, Max.

12:59Just ask AI. You don't need to report on it. You can just ask the bots. What do you have? If you tell the bot that you want it to answer a certain way, then it will. Give me this kind of answer, right? Can't tell if— Around the world. Around Elon's world. Yeah, I can't tell if we should be excited or scared. About our future. I don't know. TBD, perhaps. Let's ask ChatGPT. Hey, Max, thank you so much. Max Chapkin, Bloomberg Businessweek Senior Reporter, co-host of Everybody's Business Podcast.

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