TSMC is vying for Intel's market share and is in talks to partner with Musk's Terafab; its stock price hits a record high.

The potential collaboration between TSMC and Elon Musk's Terafab super foundry is becoming the most watched deal in the semiconductor industry. Industry insiders estimate the probability of a partnership to be over 80%, and the market has already reacted.

On Monday, TSMC's US-listed shares (TSM) hit an all-time high of $487.44 during trading, before closing up about 2.8% at $485.80, also a record high. Its market capitalization reached approximately $2.5 trillion for the first time in history, with a year-to-date gain of over 60%.

The recent surge in TSMC's stock price was driven by Elon Musk himself. He personally confirmed on social media platform X that preliminary discussions with TSMC regarding the Terafab project were underway, stating, "Just discussions, but there might be results." TSMC, however, maintained its usual low profile and made no public comment.

Meanwhile, Intel's stock, which joined the Terafab project in April, closed down about 2.6% on Monday, marking its third consecutive day of decline. The possibility of TSMC's involvement directly impacted market expectations regarding Intel's position in the project.

The probability of cooperation exceeds 80%: Texas wafer fabs form a natural synergy.

According to Taiwanese tech media Digitimes, industry insiders estimate that the probability of TSMC collaborating with Terafab is over 80%. The core logic behind this assessment lies in the high degree of overlap between TSMC's ongoing wafer fab expansion plans in Texas and Terafab's proposed site selection.

In a client report, Jordan Klein, a trading desk analyst at Mizuho Securities, noted that TSMC is exploring establishing a new U.S. manufacturing center in Texas, "which is very likely part of the project, with Musk becoming an anchor customer." He also stated that the Terafab project may ultimately be shared or split between TSMC and Intel.

According to reports, TSMC is evaluating the establishment and operation of a dedicated wafer fab to serve Tesla, SpaceX, and xAI. The most likely transaction structure is that TSMC will own and operate the fab, while SpaceX will provide support through equity investment, a commitment to purchase volume, or a combination of both. Several industry insiders told the media that the two sides have indeed been in contact, but a signing is "far away," and the current stage is more like a "dating phase."

Behind TSMC's silence: Negotiation bargaining chips and strategic considerations

TSMC's silence in the face of Musk's public confirmation is itself a negotiating stance. As the world's largest semiconductor foundry, TSMC's monopolistic position in advanced process technologies gives it ample room for negotiation.

Wedbush Securities analyst Matt Bryson reiterated his "outperform" rating on TSMC after the news was released. Jordan Klein also stated that TSMC's collaboration with Terafab "makes perfect sense, as they are widely recognized as the world's best company at large-scale advanced node semiconductor manufacturing."

TSMC's silence reflects its consistent caution in customer relationship management. Its existing clients include tech giants such as Apple, Nvidia, and AMD, and any public statement regarding capacity allocation could trigger sensitive reactions from existing customers. Maintaining a low profile while the cooperation structure remains undetermined is both a negotiation strategy and a way to protect existing customer relationships.

Customer structure and competitive landscape: Intel bears the brunt

If TSMC officially joins Terafab, the impact on the competitive landscape of the industry will be multi-dimensional.

For Intel, the impact is most direct. Intel joined Terafab as a naming partner in April and is associated with the facility's manufacturing technology plans. TSMC's potential involvement means Intel's central role in the project could be diluted, which explains the significant drop in Intel's stock price that day.

For Samsung, if TSMC secures Musk's companies as long-term anchor customers, it will further solidify its leading advantage in the advanced process foundry market and reduce Samsung's space for competing for high-end AI chip orders.

In terms of capacity allocation, Project Terafab was originally designed to provide custom chips for Tesla, SpaceX, and xAI to meet their ever-expanding computing power needs. If TSMC takes on this dedicated capacity, it means that its manufacturing layout in the United States will add a relatively independent supply chain, separating it from the capacity serving existing customers such as Apple and Nvidia.

Record high stock price: Market has priced it in in advance; catalysts and risks coexist.

TSMC's stock price had already surged over 60% before the news was confirmed, breaking through the $479 mark, a key buy point from the cup-and-switch pattern, and simultaneously reaching a new high on the Relative Strength Index (RSI), indicating a bullish technical signal. Investor's Business Daily listed TSMC as its "Stock of the Day".

However, the market's rapid reaction has also brought concerns about valuation. TSMC's stock price is currently more than 10% higher than its 50-day moving average. Analysts point out that although the breakout signal is clear, the stock price faces consolidation pressure in the short term.

Regarding potential catalysts, TSMC's September monthly revenue report will be released on Thursday, which is the next important milestone the market is watching closely. In addition, the quarterly earnings report on October 15 will provide more forward-looking guidance on capacity planning and customer demand; whether management will comment on the Terafab collaboration at that time will be the focus of the market.

On the risk front, the cooperation negotiations are still in their very early stages, and Musk himself has explicitly stated that the outcome is uncertain. If the negotiations ultimately fail to reach an agreement, or if the cooperation structure differs significantly from market expectations, the stock price, which has already partially priced in the cooperation, will face downward pressure.

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