Tesla Inks $16.5B Chip Deal with Samsung to Boost AI Chip Production

Tesla (NASDAQ:TSLA) CEO Elon Musk confirmed a $16.5 billion agreement with Samsung Electronics (KS:005930) to supply next-generation AI chips, signaling a major push in the U.S. automaker’s AI ambitions and Samsung’s foundry revival.

Musk revealed on X that Samsung’s new Texas fab will produce Tesla’s AI6 chip, calling the partnership “strategically vital.” The plant, likely Samsung’s upcoming Taylor, Texas facility, has faced delays but may gain momentum with Tesla’s involvement. Musk added that Tesla will help optimize manufacturing efficiency, pledging personal oversight of production at the nearby fab.

Samsung previously disclosed the multibillion-dollar chip contract without naming the client, citing confidentiality. Sources confirmed Tesla as the customer, with the deal running through 2033.

The agreement arrives as Samsung struggles to close the gap with TSMC and SK Hynix in the AI chip race, impacting profits and eroding its market share. Analysts estimate Samsung’s foundry business posted losses exceeding 5 trillion won ($3.63 billion) in the first half of 2025, compounded by client defections to TSMC, which serves Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM).

The Tesla deal is expected to reduce Samsung’s losses and strengthen South Korea’s chip sector amid broader U.S.-Korea trade negotiations. While Samsung is developing advanced 2-nanometer technology, analysts believe Tesla’s order won’t initially use the cutting-edge process but could pave the way for future collaboration.

Samsung, the world’s largest memory chipmaker, aims to expand its logic chip and AI capabilities to compete globally as demand for high-performance chips accelerates across automotive and tech industries.

This landmark deal marks a significant step for both Tesla’s AI roadmap and Samsung’s foundry revival in the competitive semiconductor market.