Musk May Swap Intel for TSMC in His $119 Billion Chip Plant

Elon Musk is talking to a new chipmaker, and Intel investors felt it right away.

On Sunday, Musk confirmed that Terafab, the giant chip factory Tesla and SpaceX are building in Texas, is in talks with Taiwan Semiconductor (TSMC), the world's biggest chipmaker. "Just discussions, but something may come of it," he wrote on X.

On Monday, investors picked a winner and a loser. In afternoon trading:

• Intel (INTC): down about 2%, to around $117
• TSMC (TSM): up about 3%, to around $487
• Tesla (TSLA): up about 3%, to around $380

What Terafab is

Terafab is Musk's plan to make his own chips instead of relying on outside suppliers. It's being built in Grimes County, about an hour northwest of Houston, to supply Tesla, SpaceX and xAI, his AI company.

The numbers are enormous. The first phase has $16.8 billion committed, and county filings show the full project could reach $119 billion across several phases.

Why Intel investors are nervous

Intel joined Terafab in April, when its next-generation 14A manufacturing process was named the project's only chipmaking technology. That deal has been a big part of Intel's comeback story: the stock is up more than 200% this year.

Now TSMC could get a piece. According to the Culpium newsletter, one option has TSMC building and running its own factory in Texas, with Terafab as a big customer. Another has Musk's companies owning most of it, with TSMC supplying the money, technology and know-how.

Either way, Intel would no longer be Musk's only partner, and that's what investors sold on Monday.

Intel had another problem on Monday too: Susquehanna estimated it kept losing ground to AMD in laptop chips last quarter, with its share falling to 68.1% as AMD rose to 29.3%.

What it means for you

• If you own an S&P 500 index fund, you own Intel and Tesla already. Today's moves are small for a fund that holds 500 companies.
• If you own Intel directly, remember these are only talks. Musk floats a lot of ideas, and "something may come of it" is far from a signed deal.
• If you own an international fund, TSMC is likely one of its biggest holdings, and it's up about 60% this year.

What to watch

TSMC reports its quarterly results on Oct. 15. It's in a quiet period until then, so don't expect it to comment on Musk before that. Its call is the first chance for analysts to ask about Terafab directly.