Tesla Inc. (TSLA) AI lead Ashok Elluswamy just dropped some interesting details about why the company insists on building its own chips instead of buying them off the shelf like everyone else.

The Secret Sauce: Software and Hardware Teams Working Together

Responding to a post from CEO Elon Musk on X, Elluswamy explained that Tesla's chips are "heavily co-designed with the Tesla AI software teams." It's not just hardware engineers doing their thing in isolation—the software folks are in the room from day one.

The result? Better margins on what Elluswamy calls "perf per Watt and perf per dollar" compared to other AI hardware systems. Translation: Performance per Watt measures how much computational work you get for each unit of electricity consumed, while Performance per Dollar tracks how much computing power you're getting for your money. Tesla thinks they're beating the competition on both metrics.

Here's where it gets impressive: Elluswamy says Tesla's AI4 Chip "can process and understand a million pixels of streaming video" in approximately 1 millisecond. That's incredibly fast, and according to him, it's only possible because "software AND the hardware are designed together." When your chip designers know exactly what your software needs to do, they can optimize for those specific tasks rather than building something generic.

Musk's Ambitious Chip Production Claims and FSD's Final Piece

Never one for modest predictions, Musk recently claimed Tesla would eventually produce more AI chips than any other chipmaker. "We expect to build chips at higher volumes ultimately than all other AI chips combined," he posted, underscoring just how seriously the company takes its AI infrastructure.

Meanwhile, Musk teased that the upcoming FSD v14.3 update might be the last piece of the puzzle for achieving truly unsupervised autonomous driving. That's the holy grail—cars that can drive themselves without any human supervision whatsoever.

Robotaxis Rolling Out Across Multiple States

Tesla's autonomous driving ambitions got another boost as the company's Robotaxi cleared the self-certification process in Nevada. This could open the door for commercial Robotaxi operations throughout the state.

Musk previously announced plans to expand Robotaxis to Arizona, Nevada, and Florida by year's end. He's also predicted that Tesla Robotaxis operating in Austin will go fully driverless by the end of 2025.

Price Action: TSLA closed down 1.05% at $391.01 on Friday but recovered slightly in after-hours trading, gaining 0.70% to reach $393.83, according to market data.