Published by Global Banking & Finance Review®
Posted on November 7, 2025
3 min readLast updated: January 21, 2026
Add as preferred source on GoogleElon Musk announced Tesla's plans for a massive AI chip fab, potentially partnering with Intel. Production of AI5 chips is expected by 2026, aiming for high efficiency and low cost.
By Sayantani Ghosh
SAN FRANCISCO (Reuters) -CEO Elon Musk on Thursday said Tesla probably will have to build "a gigantic chip fab" to make artificial intelligence chips and publicly mused the EV maker could work with Intel.
Tesla is designing its fifth-generation AI chip to power its autonomous ambitions, and Musk at the company's annual meeting laid out potential manufacturing plans.
"You know, maybe we'll, we'll do something with Intel," Musk said to a cheering crowd of Tesla shareholders. "We haven't signed any deal, but it's probably worth having discussions with Intel."
Struggling U.S. chipmaker Intel has its own chipmaking factories, but has lagged far behind Nvidia in the AI chip race. The U.S. government recently took a 10% stake in Intel, which needs to find an external customer for its newest manufacturing technology. Intel shares popped 4% in after-hours trading on Musk's remarks.
Intel declined to comment.
Musk scored an important victory on Thursday as shareholders approved a $1 trillion pay package over the next decade, endorsing his vision of morphing the EV maker into an AI and robotics juggernaut.
Musk has teased the AI5 chip before and reiterated that Tesla was also partnering with Taiwan's TSMC and South Korea's Samsung. The AI chips power Tesla's autonomous driving systems, including the Full Self-Driving software. Tesla is currently on its fourth-generation chip.
A small number of AI5 units would be produced in 2026, with high volume production only possible in 2027, Musk said in an X post on Tuesday, adding that AI6 will use the same fabs but achieve roughly twice the performance with volume production mid-2028.
"Even when we extrapolate the best-case scenario for chip production from our suppliers, it's still not enough," he said on Thursday.
"So I think we may have to do a Tesla terafab. It's like giga but way bigger. I can't see any other way to get to the volume of chips that we're looking for. So I think we're probably going to have to build a gigantic chip fab. It's got to be done," he said.
Musk, who often talks about his vision for the company in abstract terms, did not offer details of how such a fab would be built, but he said that it would make at least 100,000 wafer starts per month. A wafer start is the measurement of the output of a semiconductor wafer plant.
He did say the chip would be inexpensive, power-efficient and optimized for Tesla's own software. This chip would probably consume about a third of the power used by Nvidia's flagship Blackwell chip, at 10% of the cost to make, Musk said.
"I'm super hardcore on chips right now as you may be able to tell," he said. "I have chips on the brain."
(Reporting by Sayantani Ghosh; Editing by Sonali Paul)
Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think and learn like humans.
A chip fab, or semiconductor fabrication plant, is a facility where integrated circuits (ICs) are manufactured using various processes.
A partnership is a business arrangement where two or more individuals share ownership and the responsibilities of managing a company.
Production capacity refers to the maximum output that a manufacturing facility can produce in a given period, impacting supply and demand.
Investment in technology involves allocating resources, usually financial, to develop or acquire new technologies to enhance business operations.
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