After announcing Tesla’s Terafa launch date, Elon Musk says his companies will keep buying Nvidia chips: Why this matters

Elon Musk has confirmed that both his companies – SpaceX AI and Tesla – plan to continue buying Nvidia chips in large quantities even as the EV company pushes ahead with developing its own in-house AI silicon.

In a post shared on X, it is first time Musk has publicly referred to the combined entity of SpaceX and xAI as “SpaceX AI” - a nod to last month's all-stock acquisition of his AI startup xAI by SpaceX.He also talked about Tesla’s own chip, AI5.“AI5 will punch far above its weight, because the entire Tesla AI software stack is designed to make maximally effective use of every circuit. We co-signed our AI software and hardware.

Bear in mind that AI5, while it can be used for training in data centers, is primarily optimized for AI edge compute in Optimus and Robotaxi,” he said in a post. “There is still significant room for improvement. In the same half reticle and same process node, we think a single AI6 chip has the potential to match a dual SoC AI5,” he added.

Difference between Nvidia and Tesla AI5 chip

Musk was responding to a post in which former Apple and Rivian employees, Phil Beisel, explained the difference between the design of the chips created by Nvidia and the one being developed at Tesla.

“Tesla’s forthcoming AI5 uses a half-reticle design, which is crucial for yield. A reticle defines the imaging area of a lithography machine, fitting two chips per shot effectively doubles yield,” he said, adding, “By contrast, NVIDIA’s Blackwell fills nearly a full reticle, making it a single-reticle design.”“If Tesla hits its compute and efficiency targets with AI5 in this half-reticle format, it’s almost like cutting fab requirements in half.

And this has a big impact on Terafab, especially if it carries forward for AI6, AI7, etc,” Beisel further explained.Musk responded by reiterating his admiration for Jensen Huang.“I am a huge admirer of Nvidia and Jensen btw. That market cap is well-deserved. SpaceX AI and Tesla expect to continue ordering Nvidia chips at scale,” Tesla CEO said in the reply. This matters because like other AI tech giants, Musk is also relying on Nvidia - well-established chipmaker - to fulfil pricessor needs.

Tesla Terafab is almost here

Musk on Saturday (March 14) that Tesla’s Terafab project – a facility dedicated to manufacturing AI chips – is set to launch within seven days. If that timeline holds, Tesla’s in-house chip production could be up and running as soon as Saturday (March 21).