Tesla Inc. (NASDAQ: TSLA) and Space Exploration Technologies Corp. (NASDAQ: SPCX) filed a lawsuit against Illinois-based nanotechnology firm TERA-print LLC in federal court in Austin on Tuesday. The companies seek a declaration that their use of the "Terafab" name for a planned $16.8 billion AI chip complex in Texas does not infringe TERA-print’s registered "Tera-Fab" trademark.

The legal action follows a cease-and-desist letter from TERA-print after Tesla filed three trademark applications with the U.S. Patent and Trademark Office (USPTO) in May. TERA-print holds a federal registration for "TERA-FAB," which covers a desktop photolithography system used in bioengineering. The company argued in June that Musk’s ventures could create consumer confusion and threatened litigation.

Trademark Dispute Details

Tesla and SpaceX reject the infringement claim, stating that "no reasonable consumer is likely to believe" their chip manufacturing facility is affiliated with TERA-print’s desktop lithography products. The complaint emphasizes that the entities serve different customers and operate in distinct technology sectors.

TERA-print stated it discussed a settlement with Tesla as recently as Sept. 2. However, the company said it was "misled by Tesla’s professed interest in settling this matter" and will now "vigorously defend its rights." Tesla did not immediately respond to requests for comment.

Terafab Project Scale

The dispute coincides with significant expansion plans for Musk’s manufacturing ambitions. In August, Tesla and SpaceX confirmed Grimes County as the site for Terafab. The initial investment of $16.8 billion targets a 100-million-square-foot complex designed to make, package, and test advanced logic and memory chips under one roof.

SpaceX indicated the facility will employ at least 3,000 people. Filings suggest future phases could push total investment as high as $119 billion. Musk has described the facility as essential for producing AI chips "at scale for use on Earth and in space."

Compute Allocation Estimates

Musk previously estimated the split of Terafab’s AI-compute output, though he characterized the figures as a "very approximate guess." The projected allocation is as follows:

The plant aims to supply chips for Tesla’s Optimus robots and Cybercabs, as well as SpaceX’s proposed space-based data centers. Nvidia CEO Jensen Huang recently commented that while the project may look audacious, Musk is capable of executing it.

Tesla Inc (NASDAQ: TSLA) reported record second-quarter 2026 deliveries driven by strong Model Y demand, while automotive gross margins excluding regulatory credits declined to 16.3% from 19.2% in the prior quarter.

The company’s net income benefited significantly from a $1 billion mark-to-market gain on its SpaceX holdings, which offset foreign exchange losses of approximately $300 million and Bitcoin losses of about $100 million. Full Self-Driving (FSD) subscriptions were enabled on 55% of North American deliveries in Q2, with total paid FSD customers reaching nearly 1.5 million globally.

What the Numbers Show

Automotive gross margin contraction was largely non-operational. CFO Vaibhav Taneja noted that a $230 million benefit from warranty true-downs and tariff relief in Q1 did not repeat in Q2. Controlling for these prior-quarter benefits, automotive gross margins excluding credits would have been approximately flat, indicating stable underlying pricing and cost management despite rising commodity prices and interest rate subvention costs.

Energy and Service Segments

The energy business deployed 13.5 GWh of storage, a 53% sequential increase, marking its second-largest quarter. However, energy gross margins fell sharply from 39.5% to 20.4%. This decline was driven by a $240 million warranty true-up related to legacy vendor cell issues and the absence of over $200 million in tariff benefits recognized in Q1. Management expects long-term energy gross margins to normalize in the mid-to-low 20% range.

Service and other margins improved to an all-time high of 14.1% from 9.2%, supported by higher volume and better cost management across used car sales, supercharging, and insurance operations.

Capital Expenditure and Balance Sheet

Free cash flow turned negative as capital expenditure more than doubled sequentially. Tesla expects total capex to exceed $25 billion in 2026, funding expansion in Robotaxi fleets, Optimus robot production, semiconductor fabs, and solar manufacturing. To support this investment cycle, the company secured debt facilities allowing it to borrow up to $30 billion.

Operational Updates

Robotaxi operations have expanded to seven US markets, logging over 380,000 miles of unsupervised driving with zero notable incidents. The fleet is growing at double-digit weekly rates. Production has commenced for the Cybercab, Tesla Semi, and lithium/cathode refineries, with Megapack 3 production imminent. CEO Elon Musk emphasized that Optimus robot scaling faces significant challenges due to the lack of an existing supply chain, requiring substantial in-house manufacturing development.