Tesla and Intel Team Up: A Game-Changer in AI Chips at Just 10% of Nvidia’s Costs

Tesla and Intel are shaking things up in the realm of artificial intelligence, and it’s hard not to take notice. Recently, during Tesla's annual shareholder meeting on November 6, 2025, CEO Elon Musk hinted at a potential partnership with Intel to develop Tesla's fifth-generation AI chips—a strategic decision that could drastically alter the landscape of AI chip production.

The numbers are hard to ignore: Musk claims that this collaboration could lead to AI chips costing only 10% of what Nvidia currently charges. That’s not just a drop in the bucket; it's a seismic shift in the AI infrastructure that enterprise tech leaders would do well to watch closely. “We haven’t signed any deal, but it’s probably worth having discussions with Intel,” Musk said, a statement that sent Intel's stock surging by 4% in after-hours trading. Guess what? Investors see huge potential here.

Why a Partnership Matters

This possible collaboration between Tesla and Intel comes at a notable time for both companies. Tesla is working on its AI5 chip to enhance its autonomous driving capabilities. Currently, with its fourth-generation chip, it's hitting a wall regarding supply. Traditional sources, including Taiwan's TSMC and South Korea’s Samsung, just aren’t keeping up.

“Even when we look at the best-case scenario for chip production from our suppliers, it’s still not enough,” Musk mentioned. This has driven him to consider creating a new facility—a “terafab”—capable of manufacturing at least 100,000 wafer starts per month. Talk about ambition!

But it’s not just Tesla in need of a win here. Intel, which has been falling behind Nvidia, needs new clients to leverage its advanced manufacturing technologies. With the U.S. government recently investing in Intel to bolster domestic chip production, this partnership might be exactly what both companies need.

What’s at Stake: Cost & Performance

If Musk's claims hold water, the economics of AI could face a major overhaul. He pointed out that the AI5 chip would require only around one-third of the power that Nvidia's leading Blackwell chip uses and cost just 10% to produce. “I’ve got chips on my mind,” Musk said, reflecting his intense focus on this aspect of Tesla's future. In simple terms, if they pull this off, the implications for AI deployment costs are enormous.

Timeline for Production: What’s Coming Up?

Looking ahead, Tesla plans to roll out a small batch of AI5 chips in 2026, with mass production kicking off in 2027. And Musk teased future developments too—he’s aiming for an AI6 chip that will double the performance, targeting mid-2028 for high-volume production.

The scale of Tesla’s goals is nothing short of monumental. Creating this “terafab” could not only enhance chip manufacturing capabilities in the U.S. but also reduce vulnerabilities that have dogged technology supply chains of late.

What Does This Mean for Business Leaders?

With all this in mind, enterprise decision-makers should consider several implications:

• Supply Chain Resilience: Moving towards domestic chip production addresses reliance on Asian suppliers. If you're managing technology risks, shifts in where chips are made could change your vendor relationships.
• Cost Implications: If Tesla hits its cost targets, the competitive landscape for AI chips could transform overnight, so plan accordingly.
• Geopolitical Factors: The U.S. interest in bolstering domestic manufacturing ties directly into broader global tech tensions.
• Speed of Innovation: Tesla’s relentless timeline showcases rapid AI hardware developments, which could redefine your tech refresh strategies.

As discussions unfold, both Tesla and Intel will likely send ripples through the AI chip market. With Nvidia facing export challenges in China and possibly losing market share, the timing couldn’t be more critical. There’s no official agreement yet, but Musk's statements signal substantial conversations may be on the horizon.

In an ever-evolving landscape, staying adaptable in your strategy might be the key to accessing the next wave of powerful, cost-effective AI technology.