Citing 'Geopolitical Risk,' Elon Musk Reiterates Tesla's 'TeraFab' Chip-Building Effort Amid AI Push

Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk has shared that the company would need to scale up its "TeraFab" in-house chip-building efforts amid an AI push during its earnings call.

Chips Are The ‘Limiting Factor' For Tesla's Growth

On Wednesday, Musk was asked about Tesla's chip-building efforts during the earnings conference. Musk said that the AI5 Chip design was currently "the number one most critical thing to get done." However, he said that chip production remains a "limiting factor for Tesla's growth" in the next "three or four years."

"I think Tesla needs to build a TeraFab," Musk said, adding that the "geopolitical risks" were going to be a major factor in the near future. "I think if we don’t do the Tesla TeraFab, we’re going to be limited by supplier output of chips," Musk said. The CEO also shared that there would be a "bigger announcement" on TeraFab by Tesla in the future.

Tesla's 2nm Chip Ambitions

The news comes as Musk had earlier shared that Tesla would be developing its own 2nm chip amid a push towards in-house chip-making efforts. Musk had also shared that Tesla would manufacture more chips than any of its other competitors.

Musk also claimed that Tesla's fabrication process would enable him to eat a cheeseburger and smoke a cigar in the Clean Room, unlike other fabs, due to "wafer isolation."

A clean room is a highly controlled environment in chip foundries that allows only ultra-low levels of airborne particles, humidity, and other contaminants that could contaminate chipsets. The company also announced a $2 billion investment in Musk’s artificial intelligence startup, xAI.

Elon Musk Touts AI4, FSD Subscriptions

Musk had also earlier shared that the company's AI4 (HW4) chip would also be capable of running Unsupervised autonomous driving technology. On one occasion, Muk had said that the AI4 chip would be capable of achieving "self-driving safety levels very far above human" drivers.

Meanwhile, Tesla revealed that there were currently 1.1 million active FSD subscriptions, of which 70% were paid upfront. However, the company also said that as it moves to a subscription-only model next month, margins could be initially negatively impacted.

According to Benzinga Edge Rankings, Tesla scores well on the Momentum metric and offers a favorable price trend in the Long term.

Price Action: TSLA jumped 2.87% to $442.83 during pre-market trading on Thursday.

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