AI backlash has come for Elon Musk's massive Terafab chip factory in Texas
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Grimes County residents crowd a public meeting to discuss SpaceX's proposed Terafab chipmaking factory.Courtesy/Marie Egyed
Jun 4, 2026, 4:31 PM ET
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It's not just data centers.
Residents in a small Texas county are also now protesting SpaceX's proposed Terafab semiconductor facility in another sign of growing backlash against AI across the country.
Elon Musk's rocket company has submitted proposals to build the first phase of its chipmaking moonshot, which will cost at least $55 billion, in Grimes County. It could reach $119 billion if additional phases are built. About 30,000 people live in Grimes, which is about an hour outside Houston.
SpaceX's Terafab project is a joint venture with Tesla and Intel. Musk has said that, once online, it could vastly increase the global supply of semiconductor chips, which are crucial for both SpaceX's plans for AI data centers and Tesla's rollout of autonomous robotaxis and humanoid robots. Musk said in March that the factory could be as large as 100 million square feet, which would make it one of the largest factories in the world.
On Tuesday, Terafab took a step toward breaking ground when the Grimes County Commissioner Court voted to award SpaceX a critical tax abatement and a reinvestment zone designation during a public meeting.
The decision disappointed a notable swath of Grimes County residents who publicly criticized the project during the meeting. They opposed the project's size, potential impact on the rural community, and environmental fallout, echoing a nationwide backlash against AI data center developments.
"Your people don't want this. The turnout today is highly indicative that if this were put to a vote, the vast majority of people would vote it down," one man said during the meeting. "I think it's incompatible with the region."
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Some residents took issue with what they described as a lack of transparency about the project's parameters and the delayed public notice of the meeting and relevant materials.
Some Grimes County residents said there hasn't been enough transparency around Elon Musk's terafab project.
Courtesy/Marie Egyed
Marie Egyed, a member of Grimes County Citizens for Responsible Development, was among them. "This is disrespectful to the people living in that zone and in this entire county," Egyed said during the meeting.
Egyed told Business Insider that Grimes County residents had to gather information from open records requests, media reports, public meeting agendas, limited maps, and "very limited public statements."
"Many important questions remain unanswered, including the exact project scope, water needs, wastewater plans, chemical use, power requirements, traffic impacts, emergency response planning, environmental protections, and long-term expansion plans," Egyed said. "When a project this large is being discussed with public tax incentives, citizens should not have to fight to understand what is being proposed in their own county."
Egyed said that families moved to Grimes County for "peace, land, agriculture, wildlife, and open space."
"A large industrial complex near homes, farms, and rural roads could affect daily life for nearby residents, not just during construction, but for decades," she said.
Commissioner David Tullos, the only one to vote against the tax exemption and reinvestment zone designation, said he didn't receive adequate information about the project to approve it.
"As a commissioner for precinct 2, at a minimum, I should have been afforded the dialogue with SpaceX, so that I could make an informed and educated decision that best represents the interests of the folks who put me into office," Tullos said. "I do not feel I've been afforded that opportunity."
Big AI infrastructure projects, particularly the large data centers that power products from companies like SpaceX, OpenAI, and Anthropic, are meeting resistance across the country. Some cities and towns have passed or proposed moratoriums on data center construction, fearing they will drain resources, impact the environment, raise electricity rates, and have complained about a lack of transparency.
John Federspiel, the senior director of Starlink Product Engineering who was representing SpaceX at the meeting, tried to alleviate concerns. He said SpaceX is committed to sustainability measures and highlighted its potential to stimulate economic growth. He said SpaceX intends to hire 1,800 local residents.
"This project presents significant opportunities in skilled trades, construction employment, suppliers and contractors, long-term technical workforce development, and, really, impacts that will affect every current and future business in Grimes County," he said.
Despite the negative reactions, some Grimes County residents sided with SpaceX, saying they supported industrial growth.
"This shouldn't be a political conversation or a referendum on one person or one company. This is about American exceptionalism. We're living through the industrial revolution of our time, and this is a literal race," one man said. "If America doesn't win, it won't just change Grimes County. It will change the country."
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