Musk plans Tesla AI chip factory, considers Intel partnership
- ByStartupStory | November 7, 2025
Tesla CEO Elon Musk has announced plans to potentially build a massive chip fabrication facility—referred to as a “terafab”—to meet the company’s growing demand for artificial intelligence (AI) chips. This factory would be capable of producing around 1 million AI chips per month, significantly boosting Tesla’s self-sufficiency in advanced chip manufacturing. Musk highlighted that even with partnerships with existing manufacturers like TSMC and Samsung, supply might not meet Tesla’s future needs, prompting consideration of an in-house fab.
During Tesla’s recent annual shareholders meeting, Musk mentioned the possibility of collaborating with Intel for this ambitious project, though no deal has been finalized yet. Intel, which operates its own fabrication plants, has struggled to keep pace with Nvidia in the AI chip market. The U.S. government recently acquired a 10% stake in Intel, which is seeking external clients for its latest manufacturing technologies.
Tesla is currently developing its fifth-generation AI chip designed to power autonomous driving features, including the Full Self-Driving software. Production of early units (AI5 chip) is expected to begin in 2026, with high-volume manufacturing anticipated in 2027. The sixth-generation chip will follow with even greater performance.
Musk emphasized that Tesla’s new chip would be inexpensive, energy-efficient—using roughly one-third of the power—and optimized specifically for Tesla’s software stack. The planned “terafab” is aimed at overcoming capacity limitations and scaling chip output to match Tesla’s ambitious autonomous and AI-driven vehicle production goals.
In summary, Tesla is exploring building a large AI chip manufacturing facility, potentially in partnership with Intel, to produce millions of next-generation AI chips monthly. This strategic move supports Tesla’s drive to maintain leadership in autonomous vehicle technology through proprietary, efficient, and scalable semiconductor solutions.
This initiative aligns with Tesla’s broader ambition to pivot from being primarily an electric vehicle manufacturer to a leading AI and robotics company.
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