Texas Governor Greg Abbott has approved tax incentive agreements for SpaceX’s massive new semiconductor manufacturing facility in Grimes County, a project with a stated capital expenditure north of $16.8 billion. But here’s the thing: that number might be the modest version of the story.

The facility, dubbed Terafab, is a joint effort between SpaceX and Tesla aimed at producing chips for computing, artificial intelligence, and adjacent technologies. While the headline figure sits around $17 billion, the initial phase of investment could reach $55 billion, with total project expenditures potentially scaling to $119 billion.

What’s actually being built in Grimes County

The Terafab facility is planned for land near the former Gibbons Creek coal plant. The facility could eventually span up to 100 million square feet. To put that in perspective, the Pentagon, America’s largest office building, covers roughly 6.5 million square feet. Terafab would dwarf it by a factor of fifteen.

The tax incentive agreements were approved under Texas’s JETI program, which stands for Jobs Energy Technology Innovation.

Grimes County approved a 35-year tax abatement and reinvestment zone back in June 2026 with a 4-1 vote. The deal includes a $10 million upfront payment from SpaceX and $20 million in annual PILOT payments, which are payments in lieu of taxes designed to give local governments guaranteed revenue while still offering the company tax relief.

Local school boards followed with their own vote on July 14, 2026, approving the agreements 5-2. Community concerns about economic and environmental impacts have surfaced.

The fine print on commitments

Under the terms of the JETI agreements, SpaceX must invest a minimum of $5 billion by 2030. The company also needs to create at least 1,800 full-time equivalent jobs by 2035.

As of early August 2026, the Terafab project remains in its pre-construction phase. Further approvals and public engagement steps lie ahead before any ground gets broken.

Texas has been on a semiconductor recruitment tear in recent years, with Samsung among the major chipmakers expanding operations in the state.

What this means for investors and markets

The SpaceX-Tesla collaboration aspect is worth watching closely. Elon Musk’s companies sharing semiconductor manufacturing infrastructure creates a vertically integrated supply chain that could give both companies significant cost advantages.

Investors should watch the construction timeline and whether SpaceX hits the $5 billion investment threshold by 2030. That milestone will determine whether the 35-year tax abatement stays intact and whether the project scales toward those upper estimates of $119 billion.