Elon Musk has been sounding the alarm on what he considers one of America’s most exposed flanks in the global AI competition: the country doesn’t make its own advanced AI chips. And the place that does, Taiwan, sits uncomfortably close to a superpower that has never ruled out taking it by force.
In a podcast appearance with US Senator Ted Cruz on March 17, 2025, Musk laid out the problem in blunt terms. Almost all advanced AI chips are manufactured in Taiwan, he said, and a Chinese invasion would sever the world’s access to the silicon that powers modern artificial intelligence.
The Taiwan bottleneck
Taiwan Semiconductor Manufacturing Company, better known as TSMC, fabricates the vast majority of the world’s most advanced chips. Musk went further in his conversation with Cruz, claiming that TSMC produces 100% of advanced AI chips currently.
“Right now, almost all the advanced AI chips are made in Taiwan… If China were to invade Taiwan… the world would be cut off from advanced AI chips. I think it’s essential for national security that we begin manufacturing our own chips in the U.S.”
Tesla’s Terafab and the onshoring push
Musk isn’t just talking about the problem. Tesla announced its “Terafab” project in Austin, Texas, around March 2026, a facility aimed squarely at expanding US chip production capabilities.
The company is working with Samsung, which operates a fabrication facility in Taylor, Texas. That Samsung plant is expected to serve as Tesla’s first production site for AI chips, with a target date of 2027 for initial output. Tesla is also maintaining its existing relationship with TSMC and exploring potential partnerships with Intel, hedging its bets across multiple foundries.
What this means for investors
A summit in May 2026 involving Trump, Xi Jinping, Musk, and Nvidia CEO Jensen Huang underscored just how entangled AI chip policy has become with the highest levels of US-China diplomacy.
For investors watching this space, the competitive positioning among TSMC, Samsung, and Intel is shifting. Companies that can credibly offer US-based advanced chip fabrication stand to benefit from both government incentives and corporate customers looking to de-risk their supply chains. Samsung’s Taylor, Texas facility and Intel’s domestic expansion plans are directly in this lane.
Tesla is targeting 2027 for initial chip production at the Samsung facility. TSMC’s Arizona fab has faced its own delays and workforce challenges. That lag creates a window of continued vulnerability, which means the Taiwan risk premium isn’t going away any time soon.