Tesla-Samsung $16.5B AI Chip Deal: Impact & Outlook

Tesla has finalized a significant $16.5 billion agreement with Samsung Electronics for the production of its next-generation AI chips. This deal is poised to provide a substantial boost to the South Korean tech giant’s burgeoning yet unprofitable contract chip manufacturing business, though its immediate impact on Tesla’s electric vehicle sales or robotaxi rollout speed is expected to be limited.

The core of the deal involves Samsung’s new chip factory in Taylor, Texas, which will be responsible for manufacturing Tesla’s advanced AI6 chip. This commitment is a critical development for Samsung’s Texas facility, a project that has faced considerable delays and challenges in securing major clients. The news prompted a positive market reaction, with Samsung shares closing up 6.8% on Monday, driven by hopes that the agreement will strengthen its position in the competitive race to produce artificial intelligence chips, where it currently trails rival Taiwan Semiconductor Manufacturing Company (TSMC).

For Tesla, the AI6 chips are intended for deployment in its self-driving vehicles and Optimus humanoid robots. Tesla CEO Elon Musk elaborated on the potential of these future AI inference chips, stating that their substantial computing power could enable a wider range of AI applications. Inference chips are vital components used to run AI models and facilitate real-time decision-making.

Despite the strategic importance of the deal for Tesla’s long-term AI ambitions, analysts suggest it is unlikely to address the company’s immediate challenges, such as a recent decline in EV sales and the ongoing efforts to scale its nascent robotaxi service. Nevertheless, Tesla shares also saw a rise, closing up 4.2% on Monday.

Elon Musk confirmed the agreement on X (formerly Twitter), stating that the $16.5 billion figure represents “just the bare minimum” and actual output is likely to be “several times higher.” He also indicated Tesla’s active involvement in the manufacturing process, noting that Samsung “agreed to allow Tesla to assist in maximizing manufacturing efficiency,” with Musk personally committing to “walk the line” to accelerate progress. He also highlighted the factory’s convenient proximity to his residence.

The Samsung Taylor factory has struggled to attract customers since its inception, with Reuters previously reporting in October that Samsung had even postponed deliveries of ASML chipmaking equipment due to a lack of major clients, pushing the plant’s operational start to 2026. Ryu Young-ho, a senior analyst at NH Investment & Securities, emphasized the significance of the Tesla order, stating that the Taylor factory “so far had virtually no customers, so this order is quite meaningful,” even if it represents a relatively small portion of Samsung’s annual logic chip revenue.

Regarding the production timeline, specific details for the AI6 chip were not provided. However, Musk has previously indicated that the preceding AI5 chips would enter “buying production” by the end of 2026. Analysts like Lee Dong-ju of SK Securities anticipate AI6 production to commence in 2027 or 2028, a forecast that comes with the caveat of Tesla’s historical tendency to miss production targets.

Currently, Samsung manufactures Tesla’s AI4 chips, which power its Full Self-Driving (FSD) driver assistance system. TSMC, meanwhile, is slated to produce the AI5 chips, initially in Taiwan and later in Arizona, according to Musk.

Samsung, a global leader in memory chip production, is strategically expanding its contract chip manufacturing (foundry) business. The Taylor, Texas project is central to Chairman Jay Y. Lee’s vision to diversify beyond its traditional memory chip stronghold. Despite these ambitions, Samsung’s foundry business holds only an 8% share of the global market, significantly behind TSMC’s dominant 67%, according to data from market researcher Trendforce. Pak Yuak, an analyst at Kiwoom Securities, estimates that the deal will help mitigate losses in Samsung’s foundry division, which he believes exceeded 5 trillion won ($3.6 billion) in the first half of the year.

It remains unclear whether this specific deal is connected to ongoing trade discussions between South Korea and the U.S., as Seoul seeks partnerships in chips and shipbuilding to potentially reduce or eliminate prospective 25% U.S. tariffs. However, a South Korean trade ministry official informed Reuters that he had no knowledge of this particular agreement being part of the trade negotiations.