Tesla is set to unveil its mega semiconductor plant project, Terafab, this week, but the enormous investment cost is emerging as a new burden.

Electric vehicle outlet Electrek reported on Tuesday that Terafab is a facility to produce artificial intelligence chips based on an advanced 2-nanometre process. It is key infrastructure to support Tesla’s future businesses spanning full self-driving (FSD), robotaxis and its humanoid robot Optimus.

Tesla Chief Executive Elon Musk (일론 머스크) has mentioned that the factory will be larger in scale than existing foundry companies, and the market estimates total investment at $25 billion to $40 billion. That exceeds TSMC’s Gigafab, estimated at $15 billion to $20 billion, and Samsung Electronics’ Texas plant, at about $17 billion. This is interpreted as a signal that Tesla is effectively moving in earnest to bring semiconductor production in-house.

The problem is timing. Tesla’s recent performance has slowed, weakening its financial capacity. Tesla’s 2025 revenue fell from a year earlier to $94.8 billion, and core automotive revenue also dropped 10 percent to $69.5 billion. Net profit plunged 46 percent, and its operating margin slid sharply to 4.6 percent from 7.2 percent. The result reflects a combination of price-cut competition, slowing demand for electric vehicles and rising costs.

Cash generation is also slowing. Operating cash flow in 2025 was around $14.7 billion, but free cash flow after capital spending of $8.5 billion was only $6.2 billion. With 2026 capital spending expected to jump to more than $20 billion, even a simple calculation raises the possibility that free cash flow could turn to around minus $5 billion. If investment in Terafab ramps up in earnest, the pace of cash burn could accelerate further.

Tesla held about $44 billion in cash and cash equivalents and investments as of the end of last year, but analysis suggests it would not be easy to handle a large project with internal funds alone given an aggressive investment cycle and falling profitability. Tesla also left the door open in its 10-K report, saying, "We may need additional financing beyond cash flow from operations."

For that reason, the market is focusing on the possibility Tesla could knock on the door of capital markets again. Tesla has held out for about 5 years without issuing shares since 2020, but at the time Musk said, "We do not need to raise capital," and then ultimately raised a total of $12 billion. There is speculation a similar pattern could repeat this time.

With Tesla’s current market value at about $1.5 trillion, it could secure $10 billion to $15 billion with only about 1 to 2 percent dilution. That is seen as less burdensome than large-scale debt issuance and as a relatively efficient funding method when the share price is high. Analysts also say investors could be persuaded given Terafab provides a rationale to expand Tesla’s AI and robotics businesses.

Terafab is also seen as a project that goes beyond a simple chip plant and changes Tesla’s business structure itself. If it produces in-house the AI chips it had relied on external supply chains for, it could face an inflection point in both its cost structure and technological competitiveness. At the same time, the enormous upfront investment and long payback structure are factors that increase financial risk.

As a result, assessments are mixed over whether Terafab could be a game-changer for Tesla or a gamble that increases its financial burden. But for now, whether Tesla raises additional funds is becoming less a matter of choice than a matter of timing, the outlet reported.