10% of Nvidia’s cost: Why Tesla-Intel chip partnership demands attention

The potential Tesla-Intel chip partnership may ship AI chips at simply 10% of Nvidia’s value – a declare that represents a big improvement in AI infrastructure that enterprise expertise leaders can not afford to disregard.

On November 6, 2025, Tesla CEO Elon Musk acknowledged publicly on the firm’s annual shareholder assembly that the electrical automobile producer is contemplating working with Intel to provide its fifth-generation AI chips, signalling a serious strategic shift in how AI computing {hardware} is perhaps manufactured and distributed.

“You know, possibly we’ll, we’ll do one thing with Intel,” Musk instructed shareholders, in line with a Reuters report. “We haven’t signed any deal, nevertheless it’s most likely price having discussions with Intel.” The assertion despatched Intel shares up 4% in after-hours buying and selling, underscoring how significantly the market views the potential collaboration.

The strategic context behind the partnership

Tesla’s consideration of Intel as a producing accomplice comes at a essential juncture for each firms. Tesla is designing its AI5 chip to energy its autonomous driving programs.

Currently on its fourth-generation chip, Tesla has recognized a big provide constraint that conventional partnerships with Taiwan’s TSMC and South Korea’s Samsung can not handle totally.

“Even once we extrapolate the best-case situation for chip manufacturing from our suppliers, it’s nonetheless not sufficient,” Musk mentioned in the course of the shareholder assembly. The provide hole has led Tesla to contemplate constructing what Musk calls a “terafab” – a large chip fabrication facility succesful of producing no less than 100,000 wafer begins per thirty days.

For Intel, the potential partnership gives an essential alternative. The US chipmaker has lagged considerably behind Nvidia within the AI chip race and desperately wants exterior prospects for its latest manufacturing expertise.

The US authorities lately took a ten% stake in Intel, underscoring the strategic significance of sustaining home chip manufacturing capabilities.

Cost and efficiency implications

At 10% of Nvidia’s manufacturing value, the technical specs Musk outlined in the course of the shareholder assembly may reshape enterprise AI economics. According to Musk, Tesla’s AI5 chip would eat roughly one-third of the facility utilized by Nvidia’s flagship Blackwell chip, and value simply 10% as a lot to fabricate.

“I’m tremendous hardcore on chips proper now, as you might be able to inform,” Musk mentioned. “I’ve chips on the mind.”

The value and effectivity projections, if realised, may alter the economics of AI deployment. Enterprise leaders investing closely in AI infrastructure ought to monitor whether or not these efficiency targets materialise, as they might affect future expertise buying choices within the trade.

The chip can be cheap, power-efficient, and optimised for Tesla’s personal software program, Musk mentioned.

Production timeline and scale

Tesla’s chip manufacturing roadmap offers a timeline for enterprise planning. A small quantity of AI5 items can be produced in 2026, with high-volume manufacturing doable in 2027. Musk indicated in a submit on social media that AI6 will use the identical fabrication amenities however obtain roughly twice the efficiency, with quantity manufacturing focused for mid-2028.

The scale of Tesla’s ambitions is substantial. The proposed “terafab” would signify an growth of home chip manufacturing capability, probably lowering provide chain vulnerabilities which have plagued the expertise trade in recent times.

“So I feel we might must do a Tesla terafab. It’s like a giga however method larger. I can’t see another solution to get to the amount of chips that we’re on the lookout for. So I feel we’re most likely going to must construct a big chip fab. It’s obtained to be achieved,” Musk mentioned.

What this implies for enterprise decision-makers

Several strategic issues emerge from any potential Tesla-Intel chip partnership:

Supply chain resilience: The transfer towards home chip manufacturing addresses considerations about provide chain focus in Asia. Enterprise leaders managing expertise danger ought to think about how shifts in chip manufacturing geography would possibly have an effect on their provide chains and vendor relationships.

Cost construction modifications: If Tesla achieves its acknowledged value targets, the aggressive panorama for AI chips may shift. Organisations ought to put together contingency plans for potential value stress on present suppliers and consider whether or not different chip architectures are viable.

Technology sovereignty: The US authorities’s stake in Intel and assist for home chip manufacturing mirror broader geopolitical issues. Enterprise leaders in regulated industries or these dealing with delicate information ought to assess how the developments would possibly have an effect on their expertise sources.

Innovation tempo: Tesla’s aggressive timeline for a number of chip generations suggests an accelerating tempo of AI {hardware} innovation. Technology leaders ought to issue this into refresh cycles and structure choices, avoiding untimely dedication to current-generation expertise.

The broader trade context

Musk’s statements happen towards the backdrop of US-China expertise competitors. Export restrictions have impacted Nvidia’s enterprise in China, the place its market share has reportedly dropped from 95% to close zero.

Intel declined to touch upon Musk’s remarks, and no formal settlement has been introduced. However, the general public nature of the statements, and the market’s response, recommend substantive discussions might quickly be underway.

The AI chip panorama is coming into a interval of flux. Organisations ought to preserve flexibility of their infrastructure technique and monitor how partnerships like Tesla-Intel would possibly reshape the aggressive dynamics of AI {hardware} manufacturing.

The choices made immediately about chip manufacturing partnerships may decide which organisations have entry to cost-effective, high-performance AI infrastructure within the coming years.

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