‘This Will Be Very Expensive’ – Barclays Warns on Tesla’s Massive Terafab Spend

FomoAnxiety · 2026-03-23T11:30:57+00:00

Barclays analyst Dan Levy warns that Tesla's ambitious Terafab project in Austin may lead to costly capital expenditures, potentially exceeding $100 billion. Despite concerns, investor optimism remains strong as they prepare for substantial spending to ensure market dominance.

FomoAnxiety

2026-03-23 11:30:57

Abstract generation in progress

Barclays analyst Dan Levy warns that Tesla’s TSLA -3.24% ▼ capital expenditures for its proposed Terafab in Austin, Texas, will prove very expensive for the electric vehicle (EV) maker. Yet he noted that the bulls appear prepared for the company’s ambitious expansion plans.

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Over the weekend, Elon Musk announced Terafab will be jointly operated by Tesla, SpaceX, and xAI. The facility aims to produce and test chips of any kind, targeting up to 1 terawatt-hour (TWh) of annual compute power, roughly equivalent to 10% of today’s global data center capacity. Musk cited surging chip demand across his companies, amid global shortages, as the driver behind the Terafab idea.

Levy reiterated his Hold rating and $360 price target, which implies 2.2% downside potential from current levels.

Bulls Brace for Massive Spend

Levy highlighted that Tesla’s proposed scale demands far more than its already guided $20 billion+ capex for 2025. Levy’s own prior bull-case estimate of $50 billion now seems conservative. He expects costs to reach “many multiples higher or well over an order of magnitude” based on Tesla’s aspirations. Levy believes capex could potentially exceed $100 billion given benchmarks like Taiwan Semiconductor’s TSM -2.82% ▼ $40 billion Arizona fab.

Having said that, Levy expects a multi-phase buildout, with production ramping progressively to the 1 TWh target. He also anticipates funding contributions from Elon Musk’s ecosystem, including SpaceX and xAI, to offset the burden. He emphasized that investors optimistic on Tesla seem prepared for the spend, viewing it essential to dominate the market.

Is Tesla Stock a Buy, Hold, or Sell?

Analysts remain cautious about Tesla’s long-term outlook. On TipRanks, TSLA has a Hold consensus rating based on 13 Buys, 11 Holds, and seven Sell ratings. The average Tesla price target of $399.25 implies 8.5% upside potential from current levels. Over the past year, TSLA shares have surged 32.2%.

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