Elon Musk’s SpaceX <SPCX.O> and Tesla <TSLA.O> will initially invest $16.8 billion to build Terafab, an advanced AI semiconductor complex in Grimes County, Texas, as the companies race to secure the chip capacity that the billionaire has called essential to their future.

The facility is intended at narrowing the gap between global chip supply and the more than 1 terawatt of computing power that SpaceX and Tesla expect to need in the coming years.

Future expansion phases could push total investment much higher, SpaceX said in a statement on its website on Thursday, adding that the facility would employ at least 3,000 people.

“The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying jobs in the Lone Star State, and enabling us to produce AI chips at scale for use on Earth and in space,” Musk said.

Musk has been ​tightening integration of AI efforts across his companies, with SpaceX acquiring his startup xAI earlier this year ​in a deal focused on building space-based data centers, before going public in June in the largest-ever IPO.

The vertically integrated, 100-million-square-foot Terafab plant will make, package and test advanced logic and memory chips under one roof, producing processors needed to power Tesla’s Optimus robots and Cybercabs, as well as high-power chips to run SpaceX’s space-based data centers.

A May filing showed SpaceX has proposed an initial investment of $55 billion to build the Terafab, with the total amount rising to $119 billion if extra phases are completed.

To aid the efforts, SpaceX earlier this year partnered with Intel, which has been trying to expand its chip contract manufacturing business as part of a turnaround effort.

Tesla broke ground in April on a research facility at the North Campus of its Giga Texas plant, a precursor to Terafab.

The Grimes County site sits near the Gibbons Creek Reservoir, whose water the companies plan to use for industrial operations rather than local groundwater.

It adds to SpaceX and Tesla’s growing Texas footprint, alongside sites at Starbase, Bastrop and McGregor.

“Texas is where big ideas grow even bigger,” the state’s governor, Greg Abbott, said in a statement.

(Reporting by Aditya Soni and Anhata Rooprai in Bengaluru; Editing by Anil D’Silva)