They actually need it because the demand is higher than expected from consumers. And because they need a moat since every big corporation trying to capture that market too, they need the moat for the biggest compute and energy they can get.
Also businesses is were the money at, not regular consumers (especially tech-savvy folk who run models locally).
At least he says he's doing that. It doesn't really make sense since you're not going to achieve an advanced node from a standing start in a practical time frame and cost.
And further down the line in chips, which is why Elon is building a fab now.
There are plenty of capable models on HuggingFace, yet I have no way of running them.