Terafab talks with TSMC add pressure on Intel's foundry outlook

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Terafab, TSMC talks impact Intel

Highlights

Elon Musk confirmed talks with TSMC regarding Terafab, fueling speculation about possible component supply deals for Tesla and SpaceX or broader manufacturing collaboration.
Intel shares dropped 3% on Monday and another 3% Tuesday amid concerns that a TSMC-Musk partnership could undercut Intel's foundry growth prospects.
TSMC stock is up almost 60% year to date and 2.4% this week, while Intel shares have more than tripled, highlighting diverging market sentiment for the two chipmakers.

Analysts weigh scope of Terafab discussions

As reported by CNBC, Musk said on Saturday that talks with TSMC are underway and described them as "just discussions," while adding that something may come of them. He also endorsed a view on X that any TSMC role at Terafab could be supplemental, leaving Wall Street debating whether the talks center on component supply for Tesla and SpaceX or a wider manufacturing relationship.

Bank of America analyst Haas Liu said in a Monday note that the most likely outcome is deeper component collaboration tied to autos, robotics and cloud AI chips across Musk's businesses. Liu said Tesla and SpaceX already represent about 2% to 3% of TSMC sales, directly through application-specific chips and indirectly through purchases such as GPUs and networking switches, and added that the chances of TSMC licensing technology or operating a fab with a meaningful Terafab stake appear low.

Other analysts and industry specialists see room for a broader arrangement. DA Davidson's Gil Luria told CNBC that commercial terms could still make sense if TSMC limits what it shares, while American Enterprise Institute expert Chris Miller said licensing and co-development agreements have long been common in the semiconductor sector and can help spread research and development costs across partners and geographies.

Competitive risks build for Intel

Musk's talks with TSMC are being viewed more consistently as a potential competitive challenge for Intel, which had already been linked to an initial Terafab partnership announced in the spring. Mizuho analyst Jordan Klein said a TSMC-Musk deal would add competition to that setup, calling it positive for TSMC and a modest negative for bullish Intel investors.

Intel shares fell 3% on Monday and are down another 3% in Tuesday trading, extending pressure as investors assess what a new TSMC role could mean for Intel's foundry ambitions. Luria said Intel investors are currently taking an overly optimistic view, although Klein added that any TSMC involvement does not necessarily remove the broader case for Intel to win new external foundry customers if Terafab still includes the company in some form.

Market performance this year still favors both chipmakers, though by different margins. Intel shares have more than tripled year to date, while TSMC stock has climbed almost 60% and is up 2.4% for the week despite trading slightly lower on Tuesday.

In our earlier coverage of the record $60 billion financing package for Anthropic’s future access to Google semiconductors, we explained how banks are structuring massive debt deals to lock in long-dated chip supply for AI. We also noted that this kind of funding has become a key test of investor appetite for AI infrastructure spending as companies race to secure compute capacity.

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