Key Takeaways
- Daniel Ives from Wedbush maintained his Buy rating and $600 price target for Tesla, suggesting approximately 57% potential upside
- Elon Musk revealed Terafab: dual chip manufacturing facilities in Austin, Texas, developed through a collaboration of Tesla, SpaceX, and xAI
- The first facility will supply chips for Tesla’s electric vehicles and Optimus humanoid robots; the second will focus on AI infrastructure for space applications
- Ives characterizes Terafab as an initial move toward a potential Tesla-SpaceX combination he anticipates “likely in 2027”
- Dan Levy of Barclays maintained a more reserved stance, keeping his Equalweight rating with a $360 price target
Wedbush’s Daniel Ives has doubled down on his optimistic Tesla outlook, maintaining his Buy recommendation and industry-leading $600 price target after CEO Elon Musk revealed ambitious plans for a large-scale chip 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
Musk presented the Terafab vision during a Saturday evening event at Austin’s historic Seaholm Power Plant, attended by Texas Governor Greg Abbott. The initiative represents a collaborative effort among Tesla, SpaceX, and xAI — the latter having been acquired by SpaceX through an all-stock transaction in February.
The blueprint outlines two separate chip manufacturing plants in Austin. The first will manufacture semiconductors for Tesla’s vehicle lineup and Optimus robotic systems. The second facility is earmarked for AI computing infrastructure, including space-deployed systems.
When operating at maximum capacity, Tesla projects the complex could achieve approximately 70% of TSMC’s present worldwide production volume. Musk’s ambitious goal is to reach 1 terawatt of yearly capacity — roughly twice America’s current production levels.
The company is developing two distinct chip platforms. The AI5 serves as a ground-based inference processor for Tesla’s Full Self-Driving technology, Cybercab autonomous taxi, and Optimus robots. Tesla asserts it provides a 50-fold performance enhancement compared to the existing AI4 processor. The D3 represents a radiation-resistant chip engineered for SpaceX’s orbiting satellite network.
Musk indicated that 80% of Terafab’s manufacturing output would support space-oriented applications, leaving 20% for Earth-based uses.
Early production goals aim for 100,000 wafer starts monthly, eventually expanding to one million at peak operation. The complex would manufacture between 100 and 200 billion specialized AI and memory semiconductors annually using 2-nanometer technology.
Tesla’s Rationale for In-House Chip Production
Musk explained that existing suppliers — Samsung, TSMC, and Micron — cannot scale rapidly enough to meet demand. “There’s a maximum rate at which they’re comfortable expanding. That rate is much less than we’d like,” he stated.
Ives reinforced this perspective, noting these suppliers “are unable to meet future demand.” He positioned Terafab as a vertical integration strategy that brings chip design, manufacturing, memory creation, and packaging together in one location — an unprecedented achievement at this magnitude in the semiconductor industry.
Tesla’s CFO acknowledged the projected $20–25 billion investment hasn’t been incorporated into the company’s 2026 capital expenditure blueprint, which already surpasses $20 billion. No specific construction schedule was provided.
Limited-scale AI5 chip manufacturing is anticipated in late 2026, with high-volume production beginning in 2027 — though Tesla had previously pushed the AI5 timeline to mid-2027 before announcing Terafab.
Skepticism Remains Among Some Analysts
Barclays’ Dan Levy retained his Equalweight assessment and $360 target, cautioning the venture might demand investment “many multiples” beyond even his aggressive $50 billion projection.
Levy highlighted that Barclays projects Tesla’s 2026 free cash flow at negative $3 billion excluding any Terafab expenditures.
Ives also views Terafab as the preliminary step toward a Tesla-SpaceX consolidation “likely in 2027.” He initially proposed this scenario in February, forecasting it might occur “over the next 12 to 18 months.”
Wall Street’s collective perspective on Tesla remains divided. The stock carries a Hold consensus on TipRanks, reflecting 13 Buy ratings, 11 Hold ratings, and 7 Sell ratings. The mean price target stands at $399.25 — representing just 4.2% potential appreciation from present levels. TSLA has declined 14.8% year-to-date.
Separately, SpaceX is reportedly preparing to submit its IPO prospectus as soon as this week, pursuing a public offering potentially as early as June with a $1.25 trillion valuation.
