Intel has become the primary foundry partner for Elon Musk’s Terafab, a $25 billion joint venture between Tesla, SpaceX, and xAI, aiming for a terawatt of AI compute annually. Announced on April 7, 2026, Intel will contribute its advanced process node and manufacturing scale to this semiconductor facility, which is situated at the Giga Texas campus in Austin. This collaboration marks a significant win for Intel’s foundry-first strategy, led by CEO Lip-Bu Tan.
Terafab is set to be a vertically integrated semiconductor complex, focusing on chip design, fabrication, and testing, with goals to produce 100-200 billion custom AI and memory chips yearly. Plans include two facilities: one for automotive and robotics applications, and another for AI data centre and orbital processors. SpaceX, which merged with xAI in February 2026, plans to use 80% of Terafab’s output for space-based AI satellites.
Intel will leverage its 18A process node, a 1.8-nanometre-class technology, enhancing Terafab’s capability to reach its production goals. This partnership has influenced Intel’s market performance positively, with the potential to transform its foundry business.
Under Lip-Bu Tan, Intel is recovering from past struggles by focusing on domestic manufacturing, supported by US policy aimed at reducing dependency on Taiwanese chipmaking. Terafab aligns with these objectives, though its feasibility is questioned due to financial and logistical challenges. Concerns also arise from SpaceX-xAI’s internal changes and Musk’s history of setting ambitious yet delayed timelines. Nonetheless, if successful, Terafab could significantly impact the semiconductor industry by expanding US-based AI chip manufacturing.