Wedbush has indicated that the massive Terafab chip manufacturing facility planned by Tesla Motors (TSLA) and SpaceX in Austin, Texas, could represent the initial step toward a potential merger between the two companies as early as next year. Last weekend, Elon Musk, CEO of both Tesla and SpaceX, unveiled plans for a new semiconductor joint venture named Terafab, to be constructed in Austin, Texas. Terafab will consist of two advanced chip fabrication plants operated jointly by Tesla and SpaceX. Musk's initiative aims to secure greater control over semiconductor supply for areas such as artificial intelligence, robotics, and space computing.

Analysts at Wedbush stated in an investor report released Wednesday: "The Terafab project, a collaboration between Tesla and SpaceX, is projected to cost up to $25 billion. It will be located at Tesla's Giga Texas facility and, upon completion, is set to become the largest semiconductor wafer fabrication plant in history. The project will focus on chip design, lithography, manufacturing, memory production, advanced packaging, and testing. Initial production targets are estimated at 100,000 wafers per month, with plans to scale up to 1 million wafers monthly—approximately 70% of TSMC's global output. The goal is to produce 100 to 200 billion custom AI and memory chips annually to support Tesla's Full Self-Driving (FSD), Cybercab, and Optimus production lines."

Wedbush further noted: "With chip production from TSMC and Samsung insufficient to meet Musk's objectives, the facility will gradually expand its capacity to address the computational demands of his companies, which already exceed available supply. Current AI computing output is around 20 gigawatts per year, representing only about 2% of these companies' requirements." They added: "Although the specific timeline for the project remains uncertain, it will accelerate the companies' ambitious AI development strategy. We believe this will lay the groundwork for Tesla to emerge as an AI powerhouse in the coming years, with chip and memory supply expected to be the primary constraint. We also view this as the first step toward an eventual merger of Tesla and SpaceX, anticipated to be completed by 2027."