Wedbush sends blunt message on Elon Musk's Tesla and Intel deal

Elon Musk has spent years talking about vertical integration across his companies. With Terafab, he is starting to put a price tag on it. A very large one.

Wall Street is now watching closely. And Wedbush just told investors what it thinks the numbers actually mean for the companies involved.

What Terafab is and why it matters

Terafab is a planned semiconductor fabrication facility jointly developed by Tesla, SpaceX, and Intel, announced by Musk on March 21, 2026. The project is designed to produce chips for Tesla's self-driving systems, humanoid robots, AI data centers, and SpaceX's space-based computing infrastructure.

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SpaceX filed for a property tax abatement May 6 in Grimes County, Texas, disclosing an initial investment of $55 billion for the first phase of the facility, with total investment potentially reaching $119 billion across all phases, according to TechCrunch. The proposed site sits near the Gibbons Creek Reservoir, approximately 20 miles east of Bryan-College Station.

Intel joined the project on April 7 2026, becoming the first major outside commitment for Intel's foundry business, which until now has only manufactured chips for its own products. Musk confirmed on Tesla's Q1 earnings call that Terafab will use Intel's forthcoming 14A process. Intel's stock more than doubled in April, its best month on record, partly on the Terafab news.

What Wedbush said about the Musk-Intel partnership

Wedbush published a note on May 8 describing SpaceX's $55 billion Terafab commitment as significant for Intel and for semiconductor equipment vendors, according to Seeking Alpha. The firm flagged ASML, KLA, and Applied Materials as potential beneficiaries of the project, if it reaches full buildout.

The bull case, as Wedbush frames it, is that Intel gains a transformative new customer and a central role in Musk's broader AI and robotics manufacturing ecosystem. That would be a fundamentally different strategic identity from the one investors have assigned Intel for years. Wedbush believes the project could validate Intel's 14A process and position the company as a key anchor in next-generation U.S. semiconductor production.

But the firm was equally direct about the risks. A project of this scale requires enormous capital, highly coordinated execution, and a supply chain capable of supporting the buildout. Wedbush described the opportunity as real but cautioned that the distance between a $55 billion filing and an operating fab is wide, and investors should not price in the full upside before the execution is proven, Seeking Alpha noted.

The scale of what Musk is actually trying to build

The ambition behind Terafab goes well beyond a single chip factory. The long-term goal, according to Musk, is one million wafer starts per month and production of 100 to 200 billion custom AI and memory chips per year, according to Reuters.

The project targets 2-nanometer process technology and is designed to consolidate every stage of chip production, from design and fabrication to memory production, advanced packaging, and testing, all under one roof. Tesla is building a prototype advanced technology fabrication facility at GigaTexas in Austin, targeting small-batch production in 2026 and volume production in 2027. SpaceX is taking the lead on the larger Grimes County facility.

Tesla's fifth-generation AI chip, AI5, is among the first products the prototype facility is designed to produce, according to Tom's Hardware. SpaceX, which merged with xAI earlier this year in a deal that valued the combined entity at $1.75 trillion, is also targeting a June IPO, CNBC noted.

Key figures from the Terafab filing and Wedbush's assessment:

• Terafab Phase 1 investment: $55 billion; total across all phases: up to $119 billion, according to TechCrunch
• Location: Grimes County, Texas, near Gibbons Creek Reservoir, approximately 20 miles east of Bryan-College Station, according to Tom's Hardware
• Intel's role: designing, fabricating, and packaging chips using its 14A process, marking its first major foundry commitment for an outside customer, according to CNBC
• Long-term production target: 1 million wafer starts per month; 100-200 billion chips per year, according to Reuters
• Semiconductor equipment beneficiaries flagged by Wedbush: ASML, KLA, and Applied Materials, according to Seeking Alpha
• SpaceX-xAI combined valuation: $1.75 trillion; SpaceX targeting June IPO, CNBC confirmed
• Intel stock performance in April 2026: more than doubled, its best month on record, CNBC noted

Why the risks are just as important as the opportunity

Wedbush's message is not simply bullish. The firm is explicit that the gap between a Grimes County filing and an operating semiconductor fab is large, and the history of chip factory announcements is littered with projects that took far longer and cost far more than initially disclosed.

A $55 billion commitment from SpaceX is not yet a signed contract with Intel. Intel's role in the Grimes County facility has not been confirmed in the filing. The prototype in Austin is targeting small-batch production, not volume. And the full-scale buildout assumes a level of coordination between Tesla, SpaceX, and Intel that has no precedent in U.S. semiconductor history.

What Wedbush is telling investors is that Terafab is real enough to matter and ambitious enough to be transformative, if it works. The firm also wants them to understand that projects at this scale are rarely linear. The opportunity is significant. So is the distance between the filing and the factory.

Related: Elon Musk makes a stunning claim about Tesla's chip future

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This story was originally published May 9, 2026 at 6:37 PM.