Key Highlights

● Intel fell after Elon Musk confirmed early talks for TSMC to join Terafab, where Intel has been the sole Manufacturing partner since April.

● Susquehanna separately flagged a likely loss of CPU Market Share to AMD in the third quarter.

● TSMC's US-listed shares rose near record highs on the same news.

Intel fell on Monday, Oct. 5, after Elon Musk confirmed early talks for Taiwan Semiconductor to join his Terafab chip venture, raising fears that Intel could lose its exclusive role.

The Terafab twist

Intel (NASDAQ:INTC) fell on the Nasdaq-100 on Monday after Elon Musk confirmed preliminary talks for Taiwan Semiconductor Manufacturing (NYSE:TSM) to join Terafab, his Texas chip-manufacturing venture.

"Just discussions, but something may come of it," Musk said.

Intel joined Terafab in April as its sole manufacturing partner, using its 14A process. Investors worried that bringing TSMC on board could end that exclusive role, cutting into an opportunity that had been seen as a boost for Intel's contract manufacturing ambitions.

Terafab is designed to Supply chips to Tesla (NASDAQ:TSLA), SpaceX (NASDAQ:SPCX) and xAI, three companies with fast-growing appetites for computing power. For Intel, landing a customer of that scale has been an important signal that its foundry Business can win outside work.

Musk's comments stopped well short of a deal. But even the possibility of sharing the work with TSMC, the world's leading contract chipmaker, was enough to unsettle Intel shareholders.

Intel also faced pressure from Susquehanna, which flagged a likely loss of CPU market share to AMD (NASDAQ:AMD) in the third quarter. That added to the cautious mood around the stock.

Winners and losers in chips

The same news lifted TSMC. Its US-listed shares rose to near record highs. Foxconn also reported a big jump in third-quarter Revenue on AI demand. SpaceX shares jumped, helped by the Terafab talk and a bullish Morgan Stanley note.

Elsewhere in chips, Nvidia (NASDAQ:NVDA) closed at a record, while GlobalFoundries (NASDAQ:GFS) slid after a downgrade and AMD slipped.

Records on the Nasdaq

Despite Intel's drop, the broader market was strong. The Nasdaq-100 closed at a record 31,076.44, and the Nasdaq Composite jumped 286.45 points to a record 27,477.31. The S&P 500 added 51.23 points to 7,773.95, just shy of its summer record. The Dow rose 90.94 points to 51,267.90.

Mega-cap AI names did the lifting. That came even as the 10-year Treasury Yield climbed to its highest level since 2002 after the ISM services prices-paid index hit 74.0, the highest since July 2022.

Friday's weak September jobs report, with payrolls up just 29,000, cut bets on an October Fed hike to roughly one in four or less.

The bigger picture for Intel

Intel's turnaround depends heavily on proving its manufacturing technology can compete. Big outside customers are central to that story, which is why any hint of change at Terafab drew such a quick reaction.

For now, Intel remains a Terafab partner, and Musk described the TSMC talks only as discussions.

TSMC's shares also rose in Taipei. Breadth on the Nasdaq was narrow, with megacaps carrying the record while plenty of smaller tech names struggled.

Intel's slide stood in contrast to the record-setting mood elsewhere in tech, underlining how company-specific news can override the broader market.

What to watch

Investors will watch for any update on whether TSMC formally joins Terafab and how the work might be split. Intel's next Quarterly Report will offer fresh detail on its foundry business and CPU market share.

On the macro front, minutes from the Fed's September meeting are due Wednesday, Oct. 7 at 2 p.m. ET, and the Fed meets again Oct. 27 to 28. Earnings season begins with the big banks from Oct. 13.