Intel Stock Rebounds as CEO Lip-Bu Tan Says Chipmaker Stays in Elon Musk's Terafab Despite TSMC Talks

NEW YORK — Intel shares rose Wednesday after Chief Executive Lip-Bu Tan said the chipmaker will remain a partner in Elon Musk's Terafab chip manufacturing venture, easing investor fears that rival Taiwan Semiconductor Manufacturing Co. could push Intel aside.

Intel stock gained $1.61, or 1.43%, to $114.11 in morning trading on the Nasdaq, recovering part of Tuesday's 3.2% drop. The shares had also climbed about 2.5% in overnight trading after Tan's comments were reported.

At current prices, Intel has a market value of roughly $576 billion.

Intel stays in

Tan told Bloomberg News that Intel would remain involved in the Terafab project. He spoke to reporters ahead of an event in Tokyo marking Intel's 50th year of operations in Japan.

Terafab is a planned semiconductor manufacturing complex in Texas backed by Musk's companies, including Tesla and SpaceX, aimed at producing chips for artificial intelligence and robotics. Intel became the first company to back the venture in April, when it pledged its support, and has been its only named chip partner.

During Tesla's most recent quarterly earnings call, Musk indicated that Intel's 14A manufacturing process would serve as the backbone for chip production at Terafab.

TSMC talks rattled investors

Intel shares came under pressure this week after Musk confirmed early-stage discussions with TSMC, the world's largest contract chipmaker, about a possible role in Terafab.

The talks first surfaced Friday, when the Culpium newsletter reported that TSMC was exploring using Terafab as an anchor client for a future Texas factory. Musk responded on X on Saturday, writing: "Just discussions, but something may come of it."

That raised concerns that TSMC could dilute or replace Intel's role in the project. Intel shares fell about 2.6% on Monday and 3.2% on Tuesday.

Musk clarifies TSMC's role

On Wednesday, Musk moved to limit speculation about TSMC's involvement. Replying to a post on X that suggested TSMC would most likely own and run the facility, Musk wrote: "No, we will build and run the fab. Let there be ZERO doubt about that."

"Maybe TSMC subleases part of the Terafab if they want, but nothing more than that," he added.

TSMC's U.S.-listed shares fell 1.3% in premarket trading Wednesday after Musk's comments.

Intel and Tesla did not immediately respond to requests for comment from Reuters.

Why Terafab matters for Intel

The Terafab partnership is one of the most visible wins for Intel's foundry business, which manufactures chips for outside customers and is central to the company's turnaround strategy.

Intel's external foundry revenue totaled just $293 million in the second quarter, according to Investing.com, underscoring how important a high-profile customer like Musk's companies could be.

Intel has spent heavily to build new factories and advanced manufacturing processes in an effort to compete with TSMC and Samsung. Winning major outside customers is key to justifying that investment.

A big rally

Intel's stock has been one of the market's biggest comeback stories. The shares have roughly tripled over the past year, trading near the upper end of a 52-week range that runs from about $33 to a high of $142.35.

The rally has been driven by strong results and growing optimism about AI. In the second quarter, Intel's revenue rose 25% to $16.1 billion, its fastest growth in more than 15 years, while adjusted earnings of 42 cents a share beat expectations.

Revenue in Intel's data center and AI business jumped 59% to $6.3 billion as companies increased spending on AI infrastructure. Intel forecast third-quarter revenue of $15.8 billion to $16.8 billion and adjusted earnings of 38 cents a share, both above Wall Street estimates at the time.

The stock surged more than 9% last Thursday after Meta's new Muse AI agent fueled expectations of heavier AI workloads that rely on data center processors, a core part of Intel's business. Intel, Qualcomm, Arm and AMD each gained roughly 13% last week.

Analysts mixed

Wall Street remains divided on Intel's valuation after its sharp rise.

Mizuho raised its price target on Intel to $114 from $92 on Tuesday while keeping a neutral rating. Northland Securities upgraded Intel to outperform with a $120 target last month.

The average analyst target of about $109 sits slightly below the stock's current price, according to market data, suggesting some analysts believe much of the good news is already priced in.

Some investors have questioned whether Intel will reinstate its dividend now that its finances have improved. The company suspended its dividend in 2024 as it focused on cutting costs and funding its turnaround.

Intel will report third-quarter results on Oct. 29 after the market closes, according to the company. Investors will look for updates on its foundry business, AI demand and progress on its 14A manufacturing technology.

Further details on Terafab, including the roles of Intel and any potential involvement by TSMC, could also move the stock in the coming weeks.