SpaceX's (SPCX) Terafab is a difficult but necessary project that is critical to its valuation and business, and can be successful due to its collaboration with Intel (INTC), government support, robust demand, vertical integration, and access to capital, Oppenheimer said in a Wednesday research report.

The project involves Tesla, which has zero fabrication experience, making Intel's 18A node the technical backbone, raising execution risks related to timely delivery, according to the note.

Overall, execution remains the primary concern as chip fabrication involves complex supply chains and manufacturing processes, analysts wrote.

SpaceX will need a larger workforce and more semiconductor equipment to ramp production, with the equipment subject to extensive lead times, according to Oppenheimer.

The brokerage said it has an outperform rating on the stock and a price target of $250 per share.

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