Musk ruled out TSMC's involvement in the management of Terafab. The deal threatened to squeeze out Intel

Trillionaire Elon Musk has ruled out the involvement of Taiwan’s TSMC, the world’s largest custom chip manufacturer, in the management of his Terafab chip factory in Texas. Musk’s companies will “build and operate the factory themselves,” he said on October 7 on X. According to him, TSMC might at most sublease part of Terafab, “if it wants to, but nothing more.” Musk thus refuted speculation that the Taiwanese giant would take the project into its own hands, Bloomberg reports.

Musk spoke about the negotiations with TSMC late last week: “These are just discussions for now, but something might come of them.” Since then, Wall Street analysts have been speculating about what the parties are negotiating, according to CNBC. One theory suggests the talks centered on developing specific components for robots, cars, and AI chips; another points to a broader agreement, ranging from the transfer of intellectual property and manufacturing processes to joint management of production. Oppenheimer analyst Rick Schaefer even suggested a scenario in which TSMC would own and operate a factory, producing chips exclusively for Tesla, SpaceX, and xAI. It is now clear that Musk rules out any operational role for TSMC, Bloomberg reports.

Against this backdrop, shares of U.S. chipmaker Intel rose 1.5% in premarket trading, rebounding from a sharp decline, but then saw their gains narrow. The company is helping Musk develop technologies for Terafab. TSMC’s American Depositary Receipts fell 1.7%.

Musk announced the construction of Terafab in March. The plant is expected to supply cutting-edge chips to his entire business empire: Tesla’s automotive and robotics divisions, as well as SpaceX and xAI—the company formed through a merger with chatbot developer Grok—according to Bloomberg. The project’s goal is to produce up to 1 TW of computing power per year. SpaceX estimated the initial construction phases at a minimum of $55 billion, and with additional phases, the investment could reach $119 billion, according to a notice on the Grimes County, Texas, website. TSMC itself, according to Bloomberg, is considering building a new large campus in Texas.

Since the beginning of the year, Intel’s stock price has more than tripled, and this rise was largely driven by expectations surrounding Terafab, noted Gil Luria, managing director at D.A. Davidson. According to him, if Intel remains merely one of several technology suppliers, investors may revise their expectations for the company. Musk’s deal with TSMC would add competition to the partnership with Intel, warned Mizuho analyst Jordan Klein. He called such a deal “great news for TSMC” and “moderately negative” for those counting on Intel’s stock to rise.

This article was AI-translated and verified by a human editor