TLDR

  • Wedbush’s Daniel Ives maintains Buy rating with $600 price target on Tesla, suggesting roughly 57% potential upside
  • Elon Musk revealed Terafab: dual chip manufacturing facilities in Austin, Texas, created through collaboration between Tesla, SpaceX, and xAI
  • The first facility will supply Tesla’s electric vehicles and Optimus robots; the second will support AI data centers for space applications
  • Ives describes Terafab as an initial move toward a potential Tesla-SpaceX combination he anticipates around 2027
  • Barclays’ Dan Levy maintains a cautious Equalweight rating with $360 price target

Wedbush analyst Daniel Ives has reaffirmed his optimistic position on Tesla, maintaining a Buy rating along with his Wall Street-leading $600 price target after CEO Elon Musk disclosed plans for an ambitious chip manufacturing initiative named Terafab.

Musk presented the Terafab vision on Saturday evening at the historic Seaholm Power Plant in Austin, with Texas Governor Greg Abbott present for the announcement. The initiative represents a collaborative effort among Tesla, SpaceX, and xAI — the entity that SpaceX brought under its umbrella through an all-stock transaction in February.


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The blueprint outlines two separate chip manufacturing facilities in Austin. The first facility will focus on producing semiconductors for Tesla’s electric vehicle lineup and Optimus humanoid robot platform. The second facility aims to serve AI data center requirements, particularly those operating in orbital environments.

At peak operational capacity, Tesla projects the facility could achieve approximately 70% of TSMC’s total current worldwide production volume. Musk aims to reach 1 terawatt of annual manufacturing capacity — roughly double the present U.S. semiconductor output.

The company plans to develop two distinct chip architectures. The AI5 represents a terrestrial inference processor for Tesla’s Full Self-Driving technology, Cybercab robotaxi platform, and Optimus. Tesla maintains it offers a 50-fold performance enhancement compared to the existing AI4 chip. The D3 serves as a radiation-resistant processor engineered for SpaceX’s satellite constellation operating in orbit.

Musk indicated 80% of Terafab’s production would support space-oriented applications, while 20% would address terrestrial requirements.

Initial production objectives aim for 100,000 wafer starts monthly, eventually ramping to one million at maximum capacity. The facility would manufacture between 100 and 200 billion specialized AI and memory semiconductors annually using 2-nanometer process technology.

Tesla’s Rationale for In-House Chip Production

Musk explained that existing suppliers — Samsung, TSMC, and Micron — face limitations in their expansion capabilities. “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 characterized Terafab as a vertical integration strategy that brings chip design, fabrication, memory manufacturing, and packaging into a unified operation — an approach no semiconductor firm has executed at this magnitude.

Tesla’s CFO acknowledged the projected $20–25 billion investment has yet to be incorporated into the company’s 2026 capital expenditure framework, which already surpasses $20 billion. No specific construction schedule was provided.

Small-scale production of the AI5 chip is anticipated in late 2026, with high-volume manufacturing commencing in 2027 — though Tesla had previously pushed the AI5 timeline to mid-2027 prior to the Terafab disclosure.

Skepticism Remains Among Some Analysts

Barclays analyst Dan Levy retained his Equalweight rating and $360 target, cautioning the undertaking could demand spending “many multiples” beyond even his $50 billion optimistic scenario.

Levy highlighted that Barclays projects Tesla’s 2026 free cash flow at negative $3 billion before accounting for any Terafab expenditures.

Ives views Terafab as a preliminary step toward a potential Tesla-SpaceX combination “likely in 2027.” He initially suggested this possibility in February, forecasting it could materialize “over the next 12 to 18 months.”

Wall Street’s collective perspective on Tesla shows divided sentiment. The stock carries a Hold consensus on TipRanks, reflecting 13 Buy ratings, 11 Hold ratings, and 7 Sell ratings. The average price target stands at $399.25 — suggesting modest 4.2% upside from present levels. TSLA has declined 14.8% year-to-date.

SpaceX is separately reported to be preparing to submit its IPO prospectus as soon as this week, targeting a public offering by June at a $1.25 trillion valuation.