Musk's Terafab Picks Intel's Most Advanced Chip Process for AI

During Tesla's Q1 2026 earnings call on April 22, Elon Musk confirmed that Terafab, the chip fabrication venture he announced in March, will use Intel's 14A process node. SpaceX will handle high-volume manufacturing once the technology matures. Tesla runs the initial pilot production line.

Terafab is a joint project of Tesla and SpaceX, with xAI also involved, aimed at vertically integrating chip design, fabrication, memory, advanced packaging, and testing in one facility. Musk announced the project in March at the site of a defunct power plant in Austin, Texas. Intel joined as manufacturing partner on April 7. The 14A confirmation came on the earnings call.

"We plan to use Intel's 14A process, which is state-of-the-art and in fact not yet totally complete," Musk said. "By the time Terafab scales up, 14A will be probably fairly mature or ready for prime time. 14A seems like the right move and we have a great relationship with Intel, a lot of respect for the CEO, the CTO, and the new team there."

Intel's statement on joining the project described the goal as producing "1 TW/year of compute to power future advances in AI and robotics." The exact financial terms of the arrangement have not been disclosed. Analysts have characterized it as a likely technology licensing deal.

What Terafab is trying to build

The near-term target is a pilot production line in Austin starting at 100,000 wafer starts per month, scaling toward one million. Tesla's first custom AI chip, the AI5, is expected to go through the pilot line in 2026, with volume production anticipated in 2027. The pilot facility alone is estimated at around $3 billion. Tesla raised its 2026 capital expenditure guidance to over $25 billion, much of it directed at AI infrastructure.

The longer-term ambitions are on a different scale entirely. Musk has described a target of 100 to 200 billion custom AI and memory chips per year and a compute capacity of one terawatt annually, which would be more than all of the world's other foundries combined. Those figures represent a planning horizon rather than a near-term commitment.

Intel stock rose roughly 3% on the confirmation. The company has been seeking a flagship customer for 14A, its most advanced node, for some time. Tesla is an unusual choice: a company that is primarily an automaker and consumer tech brand, taking on technology risk that a customer ordering from a mature foundry like TSMC would not need to absorb. Musk's candor about the node still being unfinished was notable. It suggests Terafab is betting on Intel's roadmap in a way that few established players have been willing to do.

The broader pattern

Terafab is part of a wider trend of AI-heavy companies moving toward in-house chip manufacturing rather than depending entirely on TSMC or Nvidia for supply. Whether that model works at scale, and whether the economics justify the capital outlay, will take years to answer. For now, Intel has the customer it needed, and Musk has the foundry ambition that fits his preference for controlling his own supply chain.

Sources: Tom's Hardware, TechCrunch, U.S. News, Data Center Dynamics