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Tesla (NASDAQ:TSLA) CEO Elon Musk announced a $16.5 billion chip supply agreement with Samsung Electronics (KS:005930), a move that could revitalize Samsung’s struggling contract chip manufacturing business. The deal sent Samsung shares soaring nearly 7% and lifted Tesla 1.7% in U.S. premarket trading.
Musk revealed that Samsung’s massive new fabrication plant in Taylor, Texas, will focus on producing Tesla’s upcoming AI6 chips, key components for the company’s next-generation autonomous driving technology. “The strategic importance of this is hard to overstate,” Musk wrote on X, adding that Tesla will collaborate to enhance manufacturing efficiency, with Musk personally overseeing progress at the nearby facility.
While no timeline for the AI6 chip was provided, Tesla’s AI5 chips—produced by Taiwan Semiconductor Manufacturing (NYSE:TSM)—are expected to begin production in Taiwan and Arizona before transitioning to Samsung’s AI6. Currently, Samsung manufactures Tesla’s A14 chips for its Full Self-Driving (FSD) systems.
The 10-year contract, running through 2033, was initially disclosed by Samsung without naming Tesla due to confidentiality. The partnership could strengthen U.S.–South Korea chip ties as Seoul seeks to avoid potential 25% U.S. tariffs amid broader trade negotiations.
For Samsung, this agreement marks a significant boost as it battles to regain ground in the competitive foundry market against TSMC and faces challenges in meeting the demands of major clients like Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA). The Texas project, previously delayed by a lack of marquee clients, may now gain momentum as Tesla ramps up its AI hardware roadmap to support future autonomous vehicle ambitions.
This landmark deal signals deeper U.S.–Korea tech collaboration and positions Tesla for faster innovation in self-driving chip technology.
