The current business arrangements with GPU suppliers — such as AMD, Nvidia, or manufacturing partners TSMC and Samsung Foundry — leave SpaceX and its xAI division exposed to 'fab capacity shortages, raw material constraints, geopolitical disruptions, and natural disasters affecting semiconductor manufacturing regions.'
TSMC, the world's largest foundry and the world's largest maker of advanced logic chips, can barely meet demand for AI processors, and industry insiders warn that they are supply-constrained. For example, Nvidia increased its total supply, inclusive of inventory, purchase commitments, and prepaids, to $145 billion to ensure the supply of chips and other components. Other companies tend to do the same.
To at least partly reduce its risks, Tesla, SpaceX, and xAI intend to build TeraFab, a dedicated semiconductor production facility that will exclusively produce chips for these three companies. For now, all we know about TeraFab is that it plans to operate a fab that will be located in a SpaceX campus in Texas and use Intel's 14A process technology to make chips. Elon Musk intends to invest tens of billions in TeraFab, but this does not guarantee that it will be a success, the S-1 warns.
"While we expect to construct Terafab to address such supply constraints, Terafab may not be successful, in which case we may not have other sources of sufficient AI chips to meet our orbital AI compute demands," another claim by SpaceX reads. "While Terafab is intended to expand our internal chip manufacturing capabilities and alleviate potential future AI chip shortages at SpaceX, particularly as we pursue orbital AI at scale, we expect to continue sourcing a significant portion of our compute hardware from third-party suppliers, and there can be no assurance that we will be able to achieve our objectives with respect to Terafab within the expected timeframes, or at all."
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Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/artificial-intelligence/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/artificial-intelligence/spacex-admits-it-cant-find-enough-chips-for-orbital-ai-yet-requires-significantly-more-than-are-currently-available-to-us-firms-risk-factors-in-ipo-paperwork-also-says-ambitious-terafab-project-may-not-be-successful#main
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