Intel slides as Musk confirms early TSMC talks on his Texas Terafab chip project

The chip project that handed Intel its first big outside customer for its next-generation manufacturing process is now talking to Intel's biggest rival. Intel shares fell about 4% in premarket trading Monday after Elon Musk confirmed that his Terafab venture is in discussions with Taiwan Semiconductor Manufacturing Co.

By 7:21 a.m. ET, Intel was at $114.43, down $4.90, or 4.1%, from Friday's close of $119.33. TSMC's U.S.-listed shares rose about 1.8% to $481.23, after its Taipei-listed stock closed up 3% at NT$2,575.

Musk's confirmation was brief. Responding on X on Saturday to a report that TSMC was exploring ways to work with Terafab, he wrote: "Just discussions, but something may come of it." TSMC has not commented publicly. No terms, investment amount, manufacturing process, capacity or timeline have been disclosed, and nothing has been signed.

What is being discussed

The report came late Friday from Culpium, a newsletter written by longtime Asia technology journalist Tim Culpan. He wrote that TSMC was exploring ways to help Terafab run its planned semiconductor factories in Texas, and that "the most likely scenario is for TSMC to try to own and operate the new factory." He added that the plans "are not set in stone."

Two structures have been described. In one, TSMC would own and operate the plant while SpaceX invests in it and buys its chips. In the other, SpaceX would hold a majority stake, with TSMC supplying operating know-how and its own process technology. The first would resemble the joint ventures TSMC runs in Japan and Germany, where local partners bring capital and demand. The second would be new territory for the company. Either way, the factory would serve Musk's own companies: Terafab is meant to supply Tesla, SpaceX and xAI.

Whatever the structure, this would be a long project. TSMC Chairman and Chief Executive C.C. Wei has said building a new wafer fab takes two to three years, and raising its output takes another one to two, TaiwanPlus reported.

Why Intel investors care

Intel said in April that it was joining Terafab alongside SpaceX, xAI and Tesla. "Our ability to design, fabricate, and package ultra-high-performance chips at scale will help accelerate Terafab's aim to produce 1 TW/year of compute to power future advances in AI and robotics," the company said. The statement came in a social media post rather than a press release or securities filing, and Intel has not spelled out the scope of the work.

Later that month Musk said Tesla planned to use Intel's 14A process to make chips at Terafab, a complex he has envisioned in Austin. "14A seems like the right move, and we have a great relationship with Intel," he said then. That made Tesla the first major outside customer named for 14A, a milestone for a foundry business that has struggled to land one. Intel Chief Executive Lip-Bu Tan had said the company would exit chip manufacturing altogether if it failed to secure an external customer.

A TSMC role would not automatically push Intel out. Musk's companies could split work between suppliers, and TSMC, a leader in advanced chip packaging, could handle a different stage of production. But if TSMC ends up running a Terafab plant, it would bring its own manufacturing process, which would leave less obvious room for 14A.

TSMC's Texas question

The talks fit a second thread. Last week TSMC was reported to be evaluating an investment in Texas on top of the $265 billion it has committed to Arizona, with Taiwan's DigiTimes reporting that the company was weighing a second U.S. hub that could eventually hold up to six advanced wafer fabs. Those plans have not been finalized, and TSMC declined to comment at the time. Culpan has linked the Texas exploration to TSMC's interest in supporting Terafab.

For TSMC, a plant dedicated to one group of affiliated customers would be a departure. Its model is to share leading-edge capacity among many buyers. In exchange, Musk would get an operator with long experience running advanced factories at high yields, something a new chipmaker cannot buy quickly.