TSMC in early talks with Musk’s Terafab on Texas chipmaking, Intel shares slide 4%

Elon Musk confirmed on October 3, 2026 that TSMC is in discussions with Terafab about working together on chip manufacturing in Texas.

Intel, which signed on as Terafab’s first manufacturing partner back in April, saw its shares fall 4% on the news. The Musk ecosystem now appears to be shopping for a second foundry, and the market noticed.

What Musk actually said

Musk characterized the talks with Taiwan Semiconductor Manufacturing Company as early stage. No agreements have been reached.

According to the research findings, the discussions cover a couple of possible structures. In one, TSMC would operate the Texas facility itself, with Terafab serving as the anchor customer.

In the other model, TSMC would contribute its manufacturing expertise while other investors hold majority ownership of the facility. TSMC would supply the know-how, and someone else would own most of the building.

Neither option has been agreed to. Both remain on the table as part of the preliminary talks.

What Terafab is trying to build

Terafab is a joint effort between Tesla, SpaceX, and xAI. The goal is a vertically integrated semiconductor fabrication complex.

The project is built around anticipated demand for AI computing power. Its stated target is an output of approximately 1 terawatt per year.

The chips are meant to serve several of Musk’s businesses at once. Planned uses include Tesla’s Optimus robots, Tesla’s Cybercab vehicles, SpaceX’s data centers, and xAI.

The main site is in Grimes County, Texas. The first phase carries an investment of approximately $16.8 billion, and the project plans to create at least 3,000 jobs as it develops.

The footprint could eventually exceed 100 million square feet.

A prototype facility is already underway at Tesla’s Giga Texas in Austin.

Where Intel fits in

Intel became Terafab’s first designated manufacturing partner in April 2026. Its contribution is the company’s advanced 14A process technology.

Investors answered that question with a 4% drop in Intel’s share price.

Nothing in Musk’s comments says Intel is being replaced, and the TSMC talks have produced no deal.

What this means

For TSMC, the talks offer a potential route into a large-scale project in Texas tied to AI demand. Running the facility with Terafab as anchor customer would give TSMC more control. Providing expertise while others hold majority ownership would keep its balance sheet lighter but its influence more limited.

The research findings suggest a TSMC partnership could improve Terafab’s production efficiency and capacity, potentially speeding growth for the three Musk companies. That remains a possibility tied to a deal that does not yet exist.

A first phase of approximately $16.8 billion, a possible footprint above 100 million square feet, and a target of approximately 1 terawatt per year are big promises, and only a prototype facility is currently underway.

The next markers to watch are concrete ones: a signed agreement with TSMC, a decision on which operating model wins out, and any update on Intel’s 14A commitment. Until then, the October 3 confirmation tells us who is talking, not who is building.