During Tesla’s recent shareholder meeting, CEO Elon Musk hinted at a possible collaboration with Intel for manufacturing AI chips, sending Intel’s stock upward. While Tesla investors welcomed the news, questions remain about whether such an alliance could significantly benefit the struggling chip manufacturer.
Manufacturing Ambitions and Supply Concerns
Musk revealed Tesla’s ambitious plans for its fifth-generation AI chips, noting that even under the most optimistic scenarios, current suppliers TSMC and Samsung would be unable to meet the company’s long-term requirements. The proposed solution involves constructing what Musk described as a “gigantic chip factory” with a production capacity of at least 100,000 wafer starts monthly.
“Perhaps we’ll do something with Intel,” Musk commented during the meeting, while clarifying that no formal agreement has been reached. Despite the tentative nature of the statement, Intel shares responded positively, climbing 4% in after-hours trading and maintaining momentum through Friday’s session.
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Strategic Opportunity for Intel
A potential partnership with Tesla could represent a significant turning point for Intel, which has struggled to compete effectively in the AI chip market against dominant players like Nvidia and AMD. Securing Tesla as a client would provide both external validation and substantial revenue for Intel’s foundry business, which has faced challenges in recent years.
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The timing appears favorable for Intel, which recently reported stronger-than-expected quarterly results that exceeded analyst projections. Additionally, the U.S. government has acquired a 10% stake in the company as part of efforts to bolster domestic semiconductor production.
Analyst Caution Persists
Despite the positive market reaction, many Wall Street analysts maintain a cautious stance toward Intel. The consensus rating remains “Reduce,” though some firms including Wells Fargo have revised their price targets upward following the company’s latest earnings report.
Intel continues to face substantial headwinds, including compressed profit margins, negative return on equity, and intense competition within the AI sector. While a Tesla partnership alone wouldn’t resolve these structural challenges, it could provide crucial momentum for Intel’s turnaround strategy.
Implementation Timeline
The project’s realization remains some years away, with Tesla planning limited production of its AI5 chips beginning in 2026 and full-scale manufacturing not scheduled until 2027. This timeline provides Intel with opportunity to expand manufacturing capabilities and advance its technological development.
The critical question facing investors is whether Musk’s preliminary remarks will translate into a formal agreement. For Intel shareholders, the outcome could determine whether the company regains its standing among semiconductor industry leaders or continues to face competitive pressures.
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