Why TSMC’s Talks with Elon Musk Are a Direct Threat to Intel’s Chip Ambitions

Elon Musk may have just turned Intel Corp’s (NASDAQ:INTC) biggest potential foundry win into a two-horse race. Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) is discussing a possible role in Musk’s massive Terafab project in Texas, raising the prospect that Intel’s 14A process will have to compete for Musk’s future chip business rather than simply supply it. • Taiwan Semiconductor shares are testing new highs. Why is TSM stock breaking out? Musk Opens the Door to TSMC The development is significant because Intel was the first major chipmaker publicly tied to Terafab. In April, Musk said Tesla planned to use Intel’s next-generation 14A manufacturing process for chips at the project, giving Intel a potentially important external customer for a technology it needs to prove in the market. Now TSMC is in the picture. Musk confirmed over the weekend that discussions with TSMC were underway, responding to a report that the Taiwanese foundry was exploring ways to work with Terafab on its Texas factories. "Just discussions, but something may come of it," Musk wrote. The distinction matters. There is no announced TSMC deal, and Musk has indicated that TSMC could supplement rather than replace Intel. But investors got a clear signal that Intel’s role is not necessarily locked in. Intel shares fell more than 4% in premarket trading Monday following the news. The shares are still down 2.26% Monday morning after the market opened. Read Also: Elon Musk's Boring Company Funding Has a Catch Intel Needs Terafab to Prove 14A For Intel, the stakes extend beyond one Musk project. The company has spent years trying to turn its manufacturing operation into a competitive contract-foundry business, taking on TSMC in the market it helped pioneer. Intel has said external engagements around Intel 14A are progressing, with early design commitments expected from the second half of 2026 into 2027. That makes Terafab particularly valuable. Intel needs customers willing to put real products through its manufacturing process, not merely evaluate it. The original Terafab announcement appeared to provide exactly that opportunity. Intel described its partnership with Space Exploration Technologies Corp. (NASDAQ:SPCX), xAI and Tesla Inc (NASDAQ:TSLA) as part of Musk’s effort to address a semiconductor supply shortage and said its ability to fabricate and package high-performance chips at scale would support Terafab’s goal of producing 1 terawatt of compute annually. See More: Top Momentum Stocks TSMC Changes the Negotiation TSMC, meanwhile, is not approaching Texas from a position of weakness. The company is already expanding aggressively in the U.S., with its Arizona investment planned to reach $265 billion and additional fabs and advanced packaging facilities in development. TSMC has also been evaluating a separate Texas expansion. That gives Musk another potential supplier with deep experience in high-volume advanced manufacturing. For investors, the next question is not whether TSMC will replace Intel at Terafab. It is whether Musk’s willingness to consider both gives him leverage to demand better economics, capacity and manufacturing performance. For Intel, the critical proof point is whether Terafab becomes a durable anchor for 14A — or simply another customer that can negotiate against it. Read Also: Why Elon Musk Thinks AI Is Getting Cheaper, Not Just Smarter Photo Courtesy: Frederic Legrand – COMEO on Shutterstock.com