Intel shares dropped 4 percent in premarket trading Monday following reports that Taiwan Semiconductor Manufacturing Co. is negotiating a collaboration on Elon Musk's Terafab chip venture—a proposed $16.8 billion semiconductor facility in Texas.
Musk confirmed ongoing conversations in an X post, saying they are "just discussions, but something may come of it." TSMC has not publicly commented.
Terafab is designed to fabricate custom semiconductors for Tesla vehicles, Optimus humanoid robots, SpaceX spacecraft and xAI data centers. The initial phase targets $16.8 billion in investment and aims to employ at least 3,000 workers. The facility is planned for the Austin area before moving to a permanent site in Grimes County, Texas.
Under the arrangement being considered, TSMC would own and operate the facility. SpaceX or Terafab could invest in the venture, commit to purchasing guaranteed chip volumes, or do both.
Intel was previously identified as the only named partner for Terafab, leveraging its 14A process technology. TSMC's entry into discussions materially alters the competitive landscape. As the world's largest contract chipmaker, TSMC offers manufacturing scale and technological sophistication that Intel cannot match at equivalent timelines.
Tesla stock rose 4.7 percent to $370.59, reflecting investor perception that TSMC involvement strengthens the partnership's viability and technological roadmap.
The market reaction isolates a structural risk to Intel's revenue forecasts. High-volume custom chip contracts for automotive and artificial intelligence applications represent a growing portion of advanced semiconductor demand. The displacement of Intel as the primary Terafab supplier candidate signals that Musk's operational calculus now favors established foundry capacity and proven process maturity over greenfield domestic manufacturing partnerships.
