Key Takeaways
- Elon Musk announced Tesla and SpaceX will maintain substantial Nvidia chip purchases
- Tesla’s AI5 processor debuts March 21 through the Terafab manufacturing initiative
- The AI5 chip targets edge computing for Optimus robots and autonomous vehicles, complementing Nvidia hardware
- Tesla plans broader Full Self-Driving Supervised rollout in coming weeks
- Following last month’s acquisition, Musk now calls the merged entity “SpaceX AI”
Elon Musk revealed this week that both Tesla and SpaceX will maintain significant orders for Nvidia processors, despite Tesla’s advancement of proprietary chip technology.
Expressing strong admiration for both Nvidia and CEO Jensen Huang, Musk made these statements public while simultaneously updating followers on Tesla’s custom processor timeline.
The electric vehicle manufacturer is advancing its AI5 processor, its fifth-generation artificial intelligence chip. Production involves semiconductor manufacturing giants TSMC and Samsung.
The AI5 processor focuses on edge computing applications. This architecture enables instantaneous processing within vehicles and robotic systems without depending on cloud-based infrastructure.
Applications for the new chip include Tesla’s Optimus humanoid robot and the company’s autonomous taxi initiative. While Tesla’s existing fleet operates on AI4 technology, the AI5 chip has entered initial manufacturing stages.
Terafab Production Facility and Future Chip Development
Tesla’s Terafab manufacturing initiative, designed for volume production of AI5 processors, goes live March 21. According to Musk, the AI5 will deliver performance “far above its weight.”
Development of a sixth-generation processor, designated AI6, is already underway. Musk outlined Tesla’s ambition to bring a new chip architecture into mass production annually.
Nvidia’s processors serve primarily in training sophisticated AI models. Tesla’s proprietary chips aren’t intended to supplant this functionality but rather to complement it.
In early 2025, Musk stated that Tesla deploys both proprietary processors and Nvidia’s hardware “in combination.” This week’s remarks confirm that approach continues.
Tesla transitioned to proprietary automotive chips in 2019, discontinuing use of Nvidia’s Drive platform for vehicle applications.
Self-Driving Software Expansion and Analyst Outlook
A wider deployment of Tesla’s Full Self-Driving Supervised software is anticipated within weeks. This expansion would deliver the newest iteration of Tesla’s driver assistance technology to additional customers.
Wall Street maintains a neutral stance on Tesla shares. The stock carries a Hold consensus among analysts, with 13 Buy recommendations, 11 Hold ratings, and 7 Sell ratings recorded over the past three months.
Analysts project an average price target of $399.25 for Tesla stock. This forecast suggests approximately 1.65% potential upside from current market prices.
Regarding SpaceX developments, Musk this week referenced the combined SpaceX and xAI organization as “SpaceX AI.” The all-stock acquisition of xAI by SpaceX closed last month.
This consolidation unifies aerospace operations with artificial intelligence research under a single corporate framework. Market reports indicate SpaceX may pursue a public listing later in 2025.
Musk’s overarching approach centers on expanding computational capabilities across Tesla, SpaceX, and affiliated operations. Ongoing Nvidia procurement supports this infrastructure while internal alternatives mature.
Tesla’s Terafab chip manufacturing operation commences operations March 21.
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