In 2025, Intel Corp CEO Lip-Bu Tan said the company could exit its chip manufacturing business if it failed to secure external customers. Today, the company’s shares surged as Elon Musk’s Tesla Inc. signaled plans for a deal.

The rally followed Intel’s strong first-quarter earnings and comments from CEO Tan, who highlighted a deepening collaboration with Musk’s companies, including Tesla, SpaceX and xAI.

“I can think of no better partner than Elon Musk,” Tan said on Thursday during Intel’s earnings call. “We are excited to explore innovative ways to refactor silicon process technology.”

Earlier on Wednesday, it was reported that Tesla plans to use Intel’s next-generation 14A manufacturing process for its TeraFab AI project, marking a potential breakthrough moment for Intel’s struggling foundry ambitions.

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Musk earlier said Tesla plans to use Intel’s 14A process for its TeraFab AI chip complex in Austin, a project aimed at powering robotics, autonomous systems and data center workloads.

The agreement could become Intel’s first major customer win for its advanced manufacturing node.

Intel’s 14A technology is central to its effort to compete with Taiwan’s leading chipmaker, Taiwan Semiconductor Manufacturing Co., in the global foundry market.

During the call, Tan said Intel is engaging with multiple customers and highlighted that the Tesla partnership remains in early stages.

“It is a very broad relationship, and we will update you as we go,” he said. “We have multiple other customers we are engaging. Stay tuned.”

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Analysts have viewed the deal as a potential validation of Intel’s turnaround strategy, which hinges on attracting external chip manufacturing clients amid surging AI-driven demand.

Intel reported earnings of 29 cents per share for the quarter, far exceeding the analyst consensus estimate of 1 cent, according to Benzinga Pro data.

Revenue for the period came in at $13.58 billion, beating Wall Street expectations of $12.42 billion by 9.28% and rising from $12.67 billion a year earlier.

Looking ahead, Intel projected second-quarter adjusted earnings of 20 cents per share, well above the 9-cent estimate, and forecast revenue between $13.8 billion and $14.8 billion, compared with analyst expectations of $13.07 billion.