Intel just landed one of the biggest AI infrastructure deals of the year. The chipmaker announced Tuesday it’s partnering with Elon Musk to design and build the Terafab facility in Austin, Texas – a massive AI chip factory that will supply custom silicon for Tesla, SpaceX, and xAI. The move marks a strategic pivot for Intel as it fights to reclaim its position in the AI chip wars, while Musk bets big on vertical integration to power his autonomous vehicle fleet, humanoid robots, and orbital data centers.

Intel is making a major play to stay relevant in the AI chip race. The company announced Tuesday it’s partnering with Elon Musk on Terafab, an ambitious AI chip manufacturing facility in Austin, Texas, that could reshape how Tesla and SpaceX power their most futuristic projects.

The sprawling factory will supply custom AI chips for Musk’s “robot army” – a term that encompasses Tesla’s Full Self-Driving technology, the company’s Optimus humanoid robots, and SpaceX’s plan to launch data centers into orbit. Following the recent merger between SpaceX and xAI, the combined entity’s chip demands have skyrocketed.

“Terafab will close the gap between today’s chip production and the future’s demand,” the announcement stated, though financial terms weren’t disclosed. For Intel, this partnership represents a lifeline as the company struggles to compete with Nvidia and AMD in the exploding AI accelerator market. Intel’s foundry business has been bleeding cash, and landing Musk as a major customer provides both revenue and credibility.

The timing is critical. SpaceX plans to make its initial public offering later this year, which would give the company massive capital to invest in AI infrastructure. Musk has been vocal about the chip shortage bottlenecking his ambitions, particularly for training large language models and running inference at scale for millions of autonomous vehicles.