Elon Musk Confirmed Terafab Talks With TSMC. Intel Has Been Its Only Named Chip Partner.

For six months, Intel (NASDAQ:INTC) has been the only chipmaker named as a partner in Terafab, the chip-manufacturing project Elon Musk's companies are planning in Texas.

On Friday, Oct. 2, tech newsletter Culpium reported Taiwan Semiconductor Manufacturing (NYSE:TSM) was exploring ways to help Terafab run its planned Texas plants. Early Saturday, Oct. 3, Musk confirmed the talks on X.

"Just discussions, but something may come of it," Musk posted.

Intel shares were off about 2% on Monday as of this writing, at roughly $117. That's a small move for a stock that has more than doubled since Intel joined Terafab in early April. But I don't think Intel was ever tied very closely to the project. And its foundry (the business of making chips for other companies) still needs to land the outside customers that matter most.

Intel's role was never locked in

Intel announced on April 7 that it was joining Terafab with SpaceX, xAI, and Tesla. It pointed to its ability to "design, fabricate, and package ultra-high-performance chips at scale." Later that month, on Tesla's earnings call, Musk said the plan was to use Intel 14A, the chipmaker's next manufacturing process.

"We are excited to explore innovative ways to 'refactor' silicon process technology," Intel CEO Lip-Bu Tan said in prepared remarks for Intel's first-quarter 2026 earnings call.

When SpaceX filed to go public in May, it described Terafab as a general framework agreed with Tesla, with specific projects still subject to separate agreements. It added that neither Tesla nor Intel has to remain part of the project. And Intel hasn't disclosed any financial terms, so what it stood to gain was arguably more about credibility than revenue.

Terafab's first stage, in Grimes County, Texas, has a planned investment of over $16.8 billion. A plant that size using 14A might be a big, public endorsement of a process Intel is still finishing.

Would TSMC replace Intel?

Culpium's report, as summed up by Tom's Hardware, describes two possible setups. In the one Culpium thinks is more likely, TSMC would own and run a new factory, with SpaceX and Terafab investing, committing to buy chips, or both. In the other, SpaceX would hold a majority stake while TSMC provided the technology and operating know-how.

Either way, TSMC would probably bring its own manufacturing process -- the job Intel's 14A holds now.

Could the two work side by side? Possibly.

Sure, a project shooting for a terawatt of computing power a year might tap more than one supplier, and Musk, of course, stressed that the talks are early. But neither setup in Culpium's report includes a role for Intel.

And TSMC has spent decades making chips for other companies, a record Intel's foundry is still working to build.

Intel still needs paying outside customers

Intel's foundry took in $293 million from outside customers in the second quarter of 2026, a huge leap over the $22 million it got from them in the same period of 2025. But $181 million of the total came from Altera, a chip business Intel sold a 51% stake in last year, which today counts as a customer. Leaving out Altera, outside revenue was about $112 million, more than triple the first quarter's figure of roughly $35 million. Put another way, the business beyond Altera is growing, but it's still only about 2% of the foundry's $5.8 billion in revenue.

Terafab was never part of these numbers, so losing it wouldn't cost Intel any reported revenue. It would cost Intel a big name linked to 14A.

On Intel's January earnings call, Tan said he thought customers would start making firm 14A supplier decisions in the second half of 2026, with more coming through mid-2027.

Even if Terafab keeps Intel, a partner using Intel's technology at its own factories isn't the same as a customer paying Intel to build its chips at Intel's factories. The foundry needs the second sort of deal.

But investors are already paying for that deal. Even after Monday's dip, Intel stock trades at around 57 times 2027 earnings estimates, compared to about 22 times 2027 earnings estimates for TSMC.

In the end, I think Terafab mattered more to Intel's reputation than to its revenue. The bigger test is outside customers committing to 14A at Intel's own factories, and the share price already assumes they will. And so far, no major outside company has publicly committed to having Intel build its chips on 14A.

Daniel Sparks has clients with positions in Tesla. The Motley Fool has positions in and recommends Intel, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.