Intel joins Terafab project as chipmaker seeks manufacturing comeback
Intel Corp. is joining Elon Musk’s long-shot effort to build advanced semiconductors for Tesla Inc., SpaceX and xAI, marking an unexpected alliance as the chipmaker works to reclaim its standing in a fiercely competitive industry.
California-based Intel, which has major chip factories in Arizona, said Tuesday it will help the so-called Terafab project “refactor” technology inside a chip factory, a step that can improve chip performance, reliability and yield, or the share of chips that pass quality testing. The disclosure came in a post on X, the social media platform owned by Musk, and was first reported by Bloomberg.
Intel’s stock jumped as much as 4.9% after trading began on Wall Street on Tuesday before giving back some gains. Its share price closed at $52.91, up 4.19% for the day.
Intel is one of Arizona’s largest corporate employers with 9,600 workers at its Chandler Ocotillo campus, which is down from more than 12,000 before companywide layoffs last year.
Terafab is Musk’s ambitious plan to eventually manufacture custom chips for robotics, artificial intelligence and space-based data centers. The project aims to produce about 1 terawatt of computing capacity annually, a scale that would rival output from Taiwan Semiconductor Manufacturing Co., the world’s leading contract chipmaker.
Tesla already designs many of its own chips, including processors for its vehicles and data centers, but Musk’s companies have never manufactured them in-house. Terafab would change that equation, allowing Musk to control more of the supply chain as demand for AI computing power accelerates.
“Terafab represents a step change in how silicon logic, memory and packaging will get built in the future,” Intel Chief Executive Officer Lip-Bu Tan said in a separate post on X. “Intel is proud to be a partner and work closely with Elon on this highly strategic project.”
Intel said its ability to design, fabricate and package high-performance chips at scale would help accelerate Terafab’s goal of producing 1 terawatt of compute annually to power advances in AI and robotics.
Barron’s noted that the announcement builds on Intel’s turnaround momentum since CEO Tan took over in March 2025, with its stock price up 169% over the past 12 months.
Musk said in March that Terafab will be built in Austin, Texas, and jointly run by Tesla and SpaceX. He serves as CEO of both companies.
For Santa Clara, California-based Intel, the partnership comes as it attempts to rebound from years of shrinking market share, declining revenue and the loss of its long-held manufacturing lead. Tan has moved aggressively to streamline operations, cutting jobs and reducing costs while seeking to rebuild credibility with customers and investors.
Those efforts have included securing investments from the U.S. government as well as partners such as Nvidia Corp. and SoftBank Group Corp. Last week, Intel agreed to pay $14.2 billion to buy back half of a chip plant in Ireland that it previously sold to Apollo Global Management. The move was widely viewed as a sign of renewed confidence in its manufacturing strategy.
Tesla’s robotics push
The Terafab tie-up comes as Tesla deepens its push into robotics. The company said this week it is relocating a robotics research and development unit to Fremont, leasing 267,099 square feet at 49000 Milmont Drive. The 10-year lease is the largest industrial R&D deal in Silicon Valley during the first quarter, according to brokerage Kidder Mathews, and was first reported by CoStar.
Tesla plans to convert roughly one-fifth of its 6.2-million-square-foot Fremont factory to production of its Optimus humanoid robot. Musk told investors in January he ultimately aims to build as many as 1 million robots a year, signaling a shift that could reshape both Tesla’s workforce and its role in the global tech economy.
Intel stands to benefit from the Terafab partnership on several fronts, including strategic, financial and reputational, even if the project itself remains a long shot.