Tesla CEO Elon Musk has hinted that the company may build a large-scale chip fabrication facility, referred to as a “Terafab”, to meet the fast-growing demand for artificial intelligence chips. The announcement highlights Tesla’s increasing focus on AI hardware development. Musk also suggested the possibility of a collaboration with Intel during Tesla’s annual shareholder meeting on Thursday.
Musk shared that Tesla is designing its fifth-generation AI chip, known as AI5, to enhance the company’s autonomous driving and robotics capabilities. He explained that existing suppliers, including TSMC and Samsung, may not be able to meet Tesla’s production needs in the future.
“Even in the best-case scenario for chip production from our suppliers, it’s still not enough,” Musk said. “So, I think we may have to build a Tesla terafab. It’s like a gigafactory, but way bigger. I can’t see any other way to get to the volume of chips that we’re looking for.”
He added that the proposed facility could produce at least 100,000 wafer starts per month, which is a measure of semiconductor manufacturing capacity.
Musk’s mention that Tesla might “do something with Intel” drew enthusiastic applause from shareholders, although he clarified that no deal had been finalised. The potential collaboration could significantly benefit Intel, whose stock price rose by 4 per cent in after-hours trading following his remarks.
Intel, which has been trailing behind NVIDIA in the AI chip segment, recently received a 10 per cent equity investment from the United States government to strengthen its manufacturing capacity. A partnership with Tesla could provide Intel with a key customer for its advanced chip fabrication technologies. Intel has not yet commented on Musk’s statements.
Musk also stated that Tesla plans to produce limited quantities of its AI5 chip in 2026, with full-scale production expected in 2027. The following AI6 generation will use the same fabrication plants but deliver twice the performance by mid-2028. These new chips will support Tesla’s Full Self-Driving system and robotics programmes.
Musk’s announcement comes shortly after Tesla shareholders approved his one trillion dollar compensation package, reinforcing investor confidence in his long-term vision. His plans reflect Tesla’s broader ambition to evolve into a global leader in AI and robotics, with projects spanning self-driving vehicles, humanoid robots and large-scale chip manufacturing.
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