Tesla (NASDAQ: TSLA) and Space Exploration Technologies (NASDAQ: SPCX), or SpaceX, CEO Elon Musk recently addressed ASML (NASDAQ: ASML) employees during a fireside chat with ASML CEO Christophe Fouquet at the European company’s technology conference. It’s an important development, as it further validates Musk’s intent with the Terafab initiative and ASML’s role in facilitating it.
Terafab and ASML
As a reminder, ASML is the only company in the world that makes extreme ultraviolet (EUV) lithography machines that chip manufacturers use to make artificial intelligence (AI) chips and others. It’s an indispensable technology for AI chipmakers, and Terafab will be included in the future.
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The Terafab initiative brings together SpaceX and Tesla in a joint venture to build a massive semiconductor manufacturing complex aimed at resolving both companies’ potential supply chain bottlenecks and providing chips for Optimus (Tesla) and, in the future, Tesla electric vehicles alongside AI chips for SpaceX’s data centers, including orbital data centers.
The spending commitment for Terafab is huge, with a proposed initial investment of $55 billion that could ramp to $119 billion over time. That kind of investment offers significant potential for ASML, and Musk’s address to its employees further underscores that.
What it means to investors
For Tesla and SpaceX investors, it’s clear that Terafab is a major part of Musk’s vision for both companies. The bulls will note that it helps secure both companies’ supply chains, although it’s arguably much more important for SpaceX, as it’s the cornerstone of its AI strategy.
That said, Tesla investors are entitled to ask just how much their company will invest in Terafab. And if a potential merger between Tesla and SpaceX takes place, will the earnings and cash flow from robotaxis and Optimus be used to support SpaceX’s growth ambitions, even though they might be better returned to Tesla investors as a stand-alone company?
For ASML investors, it’s further confirmation of long-term demand for its equipment, which needs to be factored into their valuation assumptions.
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