Tesla (TSLA) Stock Rises as Wedbush Analyst Hails Terafab as Revolutionary Development

Key Highlights

• Daniel Ives from Wedbush maintained a Buy recommendation with a $600 price objective on Tesla, suggesting potential gains of approximately 57%
• CEO Elon Musk revealed Terafab: a dual chip manufacturing facility in Austin, Texas, developed through collaboration between Tesla, SpaceX, and xAI
• The first facility will supply chips for Tesla’s electric vehicle lineup and Optimus humanoid robots; the second focuses on AI infrastructure for orbital applications
• Ives views Terafab as the “opening move” toward a potential Tesla-SpaceX combination he anticipates “will likely occur in 2027”
• Dan Levy of Barclays maintained a more reserved stance, holding an Equalweight recommendation with a $360 price objective

Daniel Ives of Wedbush Securities has reaffirmed his optimistic outlook on Tesla, maintaining a Buy recommendation alongside his Wall Street-leading $600 price objective after CEO Elon Musk revealed plans for an extensive chip manufacturing initiative dubbed Terafab.

Musk introduced the Terafab initiative on Saturday evening at Austin’s historic Seaholm Power Plant, with Texas Governor Greg Abbott present for the occasion. The endeavor represents a collaborative effort among Tesla, SpaceX, and xAI — the entity SpaceX acquired through an all-stock transaction in February.

Tesla, Inc., TSLA

The blueprint outlines two semiconductor manufacturing plants in Austin. The first will manufacture chips for Tesla’s EV portfolio and its Optimus humanoid robot platform. The second facility is engineered for artificial intelligence data centers, including those deployed in orbital environments.

At maximum operational capacity, Tesla projects the complex could achieve output levels equivalent to approximately 70% of TSMC’s present worldwide production volume. Musk’s goal is to reach 1 terawatt of yearly capacity — roughly twice the current United States production total.

Two distinct chip architectures are under development. The AI5 serves as a ground-based inference processor for Tesla’s Full Self-Driving technology, Cybercab autonomous taxi, and Optimus platform. Tesla asserts it provides a 50-fold performance enhancement compared to the existing AI4 processor. The D3 represents a radiation-resistant chip engineered for SpaceX’s satellite network in orbit.

Musk indicated that 80% of Terafab’s manufacturing output would support space-oriented applications, with the remaining 20% dedicated to ground-based uses.

Preliminary objectives specify 100,000 wafer starts monthly, expanding to one million at complete operational capacity. The complex would manufacture between 100 and 200 billion specialized AI and memory processors annually using 2-nanometer fabrication technology.

Tesla’s Rationale for In-House Chip Manufacturing

Ives reinforced this perspective, noting these suppliers “lack the capacity to satisfy future requirements.” He characterized Terafab as a vertical integration strategy that brings chip architecture, manufacturing, memory fabrication, and assembly operations under unified control — an accomplishment unprecedented at this magnitude in the semiconductor industry.

Tesla’s chief financial officer confirmed the projected $20–25 billion investment has not yet been incorporated into the company’s 2026 capital spending blueprint, which already surpasses $20 billion. Construction schedules remain unannounced.

Limited-volume production of the AI5 processor is anticipated in late 2026, with high-volume manufacturing commencing in 2027 — although Tesla had previously postponed the AI5 rollout to mid-2027 prior to the Terafab disclosure.

Skepticism Remains Among Some Analysts

Barclays analyst Dan Levy preserved his Equalweight rating and $360 price objective, cautioning that the initiative could demand expenditures “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 incorporating any Terafab-related spending.

Wall Street’s overall perspective on Tesla remains divided. The stock carries a Hold consensus rating on TipRanks, derived from 13 Buy ratings, 11 Hold ratings, and 7 Sell ratings. The average analyst price target stands at $399.25 — suggesting modest 4.2% upside potential from present levels. TSLA shares are down 14.8% year-to-date.

SpaceX is also separately rumored to be preparing to submit its IPO documentation as early as this week, aiming for a public market debut as soon as June with a $1.25 trillion valuation target.

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