The landscape of artificial intelligence development is seeing significant shifts, marked by soaring costs, ambitious infrastructure plans, and evolving market dynamics. Elon Musk, CEO of Tesla, has outlined aggressive plans for the company to build its own semiconductor factories, including a massive 'Terrafab,' to meet its burgeoning AI chip demands for robots and self-driving cars. This strategic move aims to shift Tesla's AI chip supply chain away from current suppliers like TSMC and Samsung, addressing geopolitical risks and enhancing R&D flexibility. Tesla expects its in-house AI5 processor to be ready soon, with the AI6 following within a year, promising double the performance, and an AI8 chip hinted for the future. Musk emphasizes that chips and electricity are crucial for Tesla's growth, with the Terrafab targeting 100,000 wafer starts per month. These substantial investments come as the financial demands of AI development intensify across big tech. While Goldman Sachs remains optimistic, comparing the current AI investment boom to the early internet buildout of 1997-1998 rather than its speculative peak, some strategists like Michael O'Rourke from JonesTrading express concerns about a potential AI market bubble. O'Rourke points to 'atypical' signs such as Elon Musk's proposed $1 trillion pay package for Tesla and OpenAI CEO Sam Altman's comments about not expecting a government bailout. Beyond infrastructure and market speculation, the AI sector also sees rapid advancements and growing ethical discussions. China's open AI model, Kimi K2 Thinking, has notably outperformed leading proprietary models from US labs, including Grok 4, Claude 4.5 Sonnet, and Gemini 2.5 Pro, on the Artificial Analysis overall rankings, scoring 67 on the Intelligence Index and excelling in agentic tasks with 93% efficiency. Meanwhile, Perplexity CEO Aravind Srinivas has voiced strong concerns about AI companionship apps, labeling them 'dangerous' due to fears they could lead people to prefer a synthetic world over real life. A study indicates 72% of teens have used an AI companion, with 52% using them monthly, even as Meta CEO Mark Zuckerberg suggests they could fill a void for lonely individuals. Perplexity itself plans to integrate its AI search engine into Snap's messaging app in early 2026. In related market activity, stocks for C3.ai, Rigetti Computing, and eToro showed movement in after-hours trading, drawing investor attention.
Key Takeaways
- Elon Musk plans for Tesla to build its own 'Terrafab' semiconductor factories to produce AI chips, moving away from TSMC and Samsung.
- Tesla aims for rapid development, with its in-house AI5 processor nearing completion, AI6 expected within a year to double performance, and an AI8 chip hinted for the future.
- The cost of AI development is rapidly increasing, prompting big tech companies to consider significant investments in chip production.
- Goldman Sachs believes the current AI investment boom is in its buildout stage, similar to the early internet, suggesting continued growth.
- Concerns about an AI market bubble are emerging, with JonesTrading strategist Michael O'Rourke citing Elon Musk's $1 trillion pay package and OpenAI CEO Sam Altman's comments.
- China's Kimi K2 Thinking AI model scored 67 on the Intelligence Index, outperforming Grok 4, Claude 4.5 Sonnet, and Gemini 2.5 Pro in overall rankings.
- Perplexity CEO Aravind Srinivas warns that AI companionship apps are 'dangerous,' fearing they could lead users to prefer synthetic interactions over real life.
- A study indicates 72% of teens have used an AI companion, with 52% engaging monthly, despite concerns about dependency.
- Tesla's vertical integration into chip manufacturing addresses geopolitical risks and offers greater flexibility in research and development.
- Stocks for C3.ai, Rigetti Computing, and eToro experienced movement in after-hours trading, attracting investor attention.
AI Costs Soar Big Tech May Use Debt
The cost of developing artificial intelligence is rapidly increasing. Elon Musk, CEO of Tesla, suggested that Tesla might need to build its own chip factory. This is because the company will require many chips for its robots and self-driving cars. This situation highlights the growing financial demands of AI development on big tech companies.
Elon Musk Moves Tesla AI Chip Production From TSMC
Analyst Ming-Chi Kuo confirmed Elon Musk's plan for Tesla to build its own semiconductor factories. Musk aims to move Tesla's AI chip supply chain away from TSMC. This strategic shift addresses geopolitical risks, offers more flexibility in research and development, and helps with vertical integration. Tesla plans a fast timeline, moving from AI5 to AI6 chips in less than a year, and Musk even hinted at an AI8 chip for the future.
Elon Musk Plans Gigantic Terrafab for Tesla AI Chips
Elon Musk announced plans for a "Terrafab," a huge chip manufacturing plant for Tesla's AI needs. He stated that current suppliers like TSMC and Samsung might not meet future demand. Tesla's in-house AI5 processor is almost ready, and AI6 will follow within a year, doubling performance. This Terrafab aims for 100,000 wafer starts per month and will power Tesla's robots, self-driving cars, and other AI systems. Musk believes chips and electricity are key to Tesla's future growth.
Elon Musk Pay Package Hints at AI Market Bubble
JonesTrading strategist Michael O'Rourke suggests an AI bubble might be forming in the US stock market. He points to recent news like Elon Musk's $1 trillion pay package for Tesla. OpenAI CEO Sam Altman's comments about not expecting a government bailout also add to these concerns. These headlines are seen as "atypical" signs of a potential market bubble.
C3.ai Rigetti eToro Stocks Move After Hours
Several stocks showed movement in after-hours trading. These included C3.ai, Rigetti Computing, and eToro. Josh Lipton, host of Market Domination Overtime, highlighted these companies. Investors are watching these stocks for their performance outside regular trading hours.
Goldman Sachs Sees More Growth for AI Boom
Goldman Sachs believes the current AI investment boom still has room to grow. The bank compares it to the early internet boom of 1997-1998, not the speculative peak of 1999-2000. This suggests AI is in its buildout stage, with companies investing heavily in data centers and semiconductors. Goldman Sachs thinks the rally can continue if economic conditions remain stable. This view boosts confidence in AI-related stocks and infrastructure.
Perplexity CEO Warns AI Companion Apps Are Dangerous
Perplexity CEO Aravind Srinivas expressed concern about AI companionship apps, calling them "dangerous." He fears these apps could make people prefer a synthetic world over real life, as they are highly personalized. A study showed 72% of teens have used an AI companion, with 52% using them monthly. While some like Meta CEO Mark Zuckerberg see them as filling a void for lonely people, critics worry about dependency and blurring emotional lines. Perplexity itself plans to integrate its AI search engine into Snap's messaging app in early 2026.
China's Kimi K2 Thinking Outperforms Top AI Models
China's open AI model, Kimi K2 Thinking, has surpassed leading proprietary models from US labs on the Artificial Analysis overall rankings. It scored 67 on the Intelligence Index, beating Grok 4, Claude 4.5 Sonnet, and Gemini 2.5 Pro. Kimi K2 Thinking particularly excels at agentic tasks, achieving 93% in the \
Sources
- Debt Can Plug the AI Hole in Big Tech’s Deep Pockets
- Most-popular iPhone analyst Ming-Chi Kuo on why Elon Musk is moving Tesla’s AI chip supply chain away from TSMC - The Times of India
- Elon Musk Floats ‘Terrafab’ as Tesla’s Next Big AI Chip Bet
- Elon Musk's $1T package among headlines signaling AI bubble
- C3.ai, Rigetti Computing, eToro: After-Hours Movers
- Goldman Sachs says AI boom resembles 1997 tech cycle, not dotcom peak, with room to run
- Perplexity's CEO says he's worried about AI companionship apps: 'Your mind is manipulable very easily'
- China’s Kimi K2 Thinking Beats Grok 4, Claude Sonnet 4.5 & Gemini 2.5 Pro On Artificial Analysis Intelligence Index
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