Intel (INTC) Stock Surges on Tesla Partnership Announcement Ahead of Q1 Earnings

Key Takeaways

• Intel shares climbed approximately 3.6% during after-hours trading following Elon Musk’s announcement that Tesla will utilize Intel’s 14A chip manufacturing technology for its Terafab facility in Austin.
• This partnership represents Intel’s inaugural major external client for its advanced 14A manufacturing process, a crucial achievement CEO Lip-Bu Tan identified as vital to the foundry division’s survival.
• Analysts anticipate Intel’s Q1 2026 earnings to reveal adjusted EPS of merely 2 cents, a significant decline from 13 cents in the prior year, alongside revenue forecasts of $12.4 billion.
• Intel’s foundry division currently operates without any external clients and faces an anticipated $2.4 billion operating loss for the first quarter.
• Shares of Intel reached a 52-week peak of $70.33 recently and have surged 235% over the previous 12 months.

In a significant announcement during Tesla’s quarterly earnings call Wednesday, Elon Musk revealed plans for the electric vehicle manufacturer to leverage Intel’s cutting-edge 14A chip production process for the Terafab complex—an ambitious AI and semiconductor facility under development in Austin, Texas.

The revelation triggered a 3.6% spike in Intel’s stock price during extended trading hours. Come Thursday’s premarket session, shares were exchanging hands at $66.20, reflecting a 1.4% increase.

Intel Corporation, INTC

This partnership arrives at a critical juncture for Intel. CEO Lip-Bu Tan has openly acknowledged that the foundry operation’s viability depends on securing external clientele. The development costs associated with the 14A manufacturing process exceed what internal chip production alone can justify.

The Terafab initiative represents Musk’s ambitious blueprint for an extensive chip and artificial intelligence campus serving both Tesla and SpaceX. The complex would ultimately accommodate two state-of-the-art manufacturing plants—one dedicated to automotive and humanoid robotics production, the other focused on space-oriented data center infrastructure. According to Musk, the facility could eventually generate one terawatt of computing capacity annually, dwarfing the approximately half-terawatt currently produced throughout the entire United States.

These projections warrant scrutiny, however. Research from Bernstein analysts suggests achieving such scale would require capital investments ranging from $5 trillion to $13 trillion. Critical questions regarding equipment financing, operational management, and timeline remain unanswered.

Financial Reality Paints a Challenging Picture

Despite the encouraging partnership announcement, Intel‘s immediate financial outlook remains challenging. Market analysts project Q1 adjusted earnings per share of only 2 cents, representing a steep decline from the 13 cents reported in the same period last year. Revenue is anticipated to contract 2% year-over-year, settling around $12.4 billion.

The foundry segment, central to Intel’s long-term strategic vision, presently lacks any external customers and is projected to generate a $2.4 billion operating loss during Q1. The personal computer chip division—accounting for approximately 57% of Intel’s first-quarter revenue—faces pressure from a worldwide memory component shortage that has inflated costs and is expected to reduce sales by roughly 7% compared to last year.

Intel’s position in the AI data center market has also deteriorated significantly. While the company commanded 71% of the data center processor market in 2021, that share plummeted to just 7% by last year in the competitive landscape dominated by Nvidia.

Evaluating the Tesla Agreement’s True Impact

The 14A manufacturing process won’t launch until 2028, limiting any near-term financial contributions. Nevertheless, the partnership carries substantial symbolic and strategic significance. Tan had previously indicated Intel would potentially abandon the foundry business altogether if unable to attract external customers.

Intel’s stock price already reflects considerable investor optimism. Shares touched $70.33 last week—establishing a new high—and currently trade at 92 times projected 12-month earnings. For context, the S&P 500 trades at approximately 21 times.

Intel is scheduled to release first-quarter earnings results Thursday afternoon.

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