Intel announced Tuesday it will partner with Elon Musk's companies on a major AI chip manufacturing project called Terafab, planned for construction in Austin, Texas. The semiconductor manufacturer will help design and build the facility, which aims to supply AI chips to both SpaceX and Tesla.

The partnership brings Intel's semiconductor manufacturing expertise to Musk's latest technology venture. According to reports, SpaceX has recently merged with xAI, Musk's artificial intelligence company, creating expanded demand for specialized AI processing chips across his business empire.

The Terafab project represents a significant expansion of AI chip production capacity in Texas, as companies across the technology sector compete to secure adequate supplies of the specialized processors needed for artificial intelligence applications. The facility is expected to serve the growing computational needs of both SpaceX's space operations and Tesla's autonomous vehicle development.

Intel's stock price rose following the announcement of its involvement in the project. The partnership comes as Intel seeks to strengthen its position in the competitive AI chip market, where companies like Nvidia have gained significant market share.

The timeline for construction and operation of the Terafab facility has not been disclosed. The project adds to the concentration of semiconductor manufacturing investments in Texas, which has become a major hub for chip production in recent years.