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Tesla and Intel are reportedly exploring a strategic partnership to manufacture AI chips, potentially disrupting the current AI hardware landscape dominated by Nvidia. Tesla CEO Elon Musk indicated that the collaboration could result in AI chips costing just 10% of Nvidia’s current prices.

Musk revealed Tesla’s consideration of partnering with Intel for the production of its fifth-generation AI chips (AI5), aimed at addressing supply chain constraints impacting its autonomous driving systems. Tesla is seeking alternative manufacturing solutions as demand grows.

For Intel, this partnership represents a significant opportunity to bolster its presence in the rapidly expanding AI chip market, where it currently trails Nvidia. The U.S. government’s investment in Intel further underscores the strategic importance of domestic chip production and reducing reliance on foreign suppliers.

According to Musk, Tesla’s AI5 chip is projected to consume only one-third of the power compared to Nvidia’s Blackwell chip while boasting a significantly lower manufacturing cost. Production is anticipated to commence in 2026, with high-volume production targeted for 2027. Plans are already underway for the AI6 chip, expected in mid-2028.

If realized, this partnership has the potential to reshape the AI chip market dynamics, potentially driving down costs, improving supply chain resilience, and fostering competition. Businesses should closely monitor these developments as they may significantly influence future technology investments and procurement strategies.