A potential chip partnership between Tesla and Intel could deliver AI chips at just 10% of Nvidia’s cost. This is a claim that represents a significant development in AI infrastructure that enterprise technology leaders cannot ignore.
On November 6, 2025, Tesla CEO Elon Musk publicly stated at the company’s annual shareholder meeting that the electric car maker is considering collaborating with Intel to produce fifth-generation AI chips, signaling a major strategic shift in how AI computing hardware is manufactured and distributed.
“We probably will, we’ll do something with Intel,” Musk told shareholders, Reuters reported. “We don’t have any deals, but it’s probably worth talking to Intel.” The statement sent Intel shares up 4% in after-hours trading, underscoring how seriously the market is looking at the potential partnership.
Strategic background behind the partnership
Tesla’s consideration of Intel as a manufacturing partner comes at a critical juncture for both companies. Tesla is designing its AI5 chip to power its self-driving system.
Tesla, which is currently developing fourth-generation chips, has identified significant supply constraints that cannot be adequately addressed through traditional partnerships with Taiwan’s TSMC and South Korea’s Samsung.
“Even if we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough,” Musk said at the shareholders’ meeting. The supply gap has led Tesla to consider building what Musk calls a “Terra fab,” a large-scale chip manufacturing facility capable of producing at least 100,000 wafer starts per month.
For Intel, the potential partnership presents a significant opportunity. The US chipmaker is far behind Nvidia in the AI chip race and is in dire need of external customers to provide it with the latest manufacturing technology.
The US government recently acquired a 10% stake in Intel, underscoring the strategic importance of maintaining domestic chip manufacturing capacity.
Cost and performance impact
At 10% of Nvidia’s manufacturing costs, the technical specifications Musk outlined at the shareholder meeting could reshape the company’s AI economy. Tesla’s AI5 chip consumes about a third of the power used by Nvidia’s flagship Blackwell chip and costs only 10% to manufacture, Musk said.
“As you can probably tell, I’m super into chips right now,” Musk said. “I have a chip in my brain.”
Cost and efficiency predictions could change the economics of AI deployment. Leaders of companies that have invested heavily in AI infrastructure need to monitor whether these performance goals are realized. This is because it can influence future technology purchasing decisions in the industry.
The chip will be cheap, power efficient and optimized for Tesla’s own software, Musk said.
Production schedule and scale
Tesla’s chip production roadmap provides a timeline for the company’s plans. AI5 is expected to be produced in small numbers in 2026, with mass production possible in 2027. Musk suggested in a social media post that AI6 will achieve roughly twice the performance while using the same manufacturing equipment, with mass production targeted for mid-2028.
The scale of Tesla’s ambitions is considerable. The proposed “terra fabs” would mean expanding domestic chip manufacturing capacity and could reduce supply chain vulnerabilities that have plagued the technology industry in recent years.
“So I think we might need to build a Tesla terra fab. It’s like Giga, but much bigger. I don’t see any other way to achieve the amount of chips we’re looking for. So I think we probably need to build a huge chip fab. It’s got to be done,” Musk said.
What this means for corporate decision makers
A potential chip partnership between Tesla and Intel raises several strategic considerations.
Supply Chain Resilience: The move towards domestication of chip manufacturing addresses concerns about the concentration of supply chains in Asia. Business leaders managing technology risk must consider how changes in chip manufacturing geographies will impact their supply chains and vendor relationships.
Changing cost structure: If Tesla can meet its cost targets, the competitive landscape for AI chips could change. Organizations should develop contingency plans for potential price pressures on current suppliers and evaluate whether alternative chip architectures are viable.
Technological sovereignty: The U.S. government’s investment in Intel and support for domestic chip manufacturing reflects broader geopolitical considerations. Business leaders in regulated industries and companies that handle sensitive data need to assess how trends will impact their technology sources.
Pace of innovation: Tesla’s aggressive schedule for multiple chip generations suggests the pace of innovation in AI hardware is accelerating. Technology leaders must factor this into their refresh cycles and architectural decisions to avoid premature commitments to current generation technologies.
broader industry context
Musk’s remarks were made against the backdrop of the technological competition between the United States and China. Export restrictions have reportedly affected Nvidia’s operations in China, with market share dropping from 95% to almost zero.
Intel declined to comment on Musk’s remarks, and no formal agreement has been announced. However, given the public nature of the statement and the market reaction, substantive discussions may begin soon.
The AI chip landscape is in a period of flux. Organizations should maintain flexibility in their infrastructure strategies and monitor how partnerships like Tesla and Intel reshape the competitive dynamics of AI hardware manufacturing.
Decisions made today regarding chip manufacturing partnerships could determine which organizations have access to cost-effective, high-performance AI infrastructure in the years to come.
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