Intel Corp (NASDAQ:INTC, XETRA:INL) shares climbed 9.1% Wednesday after the chipmaker announced it is joining Elon Musk’s Terafab project, but analysts caution that the deal’s long-term benefits depend heavily on how the partnership is structured.
Wedbush analysts said the collaboration makes strategic sense, noting that “a tie-up with Intel to build the proposed Terafab chip complex makes significantly more sense than Elon’s companies attempting to develop 2nm process technology on their own.”
However, they warned that Terafab’s customer base—including Tesla’s AI hardware ambitions, xAI’s data center needs, and SpaceX’s satellite chips—is inherently riskier than Intel’s traditional clients, such as hyperscale cloud providers and major chip design houses.
“The impact for Intel will, in part, depend on which entities carry the funding risk for the fab construction,” Wedbush wrote. “We would prefer to see Intel involved more operationally and less financially, which would mitigate downside if demand from these new forays falls short of expectations.”
TeraFab, originally introduced as a joint venture between Tesla Inc. (NASDAQ:TSLA) and SpaceX, now also includes Musk’s AI startup, xAI. According to Musk, the project aims to produce chips for Tesla’s robotaxis and Optimus robots, as well as specialized semiconductors for SpaceX’s planned network of AI-powered orbital data centers.
Intel stated that its expertise in chip design, fabrication, and packaging could support TeraFab’s goal of producing 1 terawatt per year of compute for next-generation AI and robotics systems.