Tesla Signs $16.5B Samsung AI Chip Deal for Next-Gen Tech
Tesla has finalized a $16.5 billion agreement with Samsung Electronics for the production of its next-generation AI chips, a move anticipated to significantly bolster the South Korean tech giant’s burgeoning yet challenging contract manufacturing business. This deal, however, is not expected to immediately alleviate Tesla’s current hurdles, such as declining electric vehicle (EV) sales or the accelerated rollout of its robotaxi service.
According to Tesla CEO Elon Musk, Samsung’s new chip fabrication plant in Taylor, Texas, will be responsible for manufacturing Tesla’s AI6 chip. This commitment is poised to provide a substantial boost to Samsung’s ambitious Texas project, which has faced delays and struggled to secure major clients since its inception. Following the announcement, Samsung shares saw a 6.8% increase on Monday, fueled by optimism that the deal would advance its competitive position in the artificial intelligence chip market, where it aims to close the gap with market leader TSMC. Tesla’s shares also rose by 4.2% on the same day.
The AI6 chip, an “inference chip,” is designed to process AI models and make real-time decisions. Musk indicated these chips would be deployed in Tesla’s self-driving vehicles and Optimus humanoid robots, suggesting their substantial computing power could also enable broader AI applications.
Musk underscored his personal commitment to the success of the collaboration in a post on X, stating, “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.” He further elaborated on the financial scope, noting that the $16.5 billion figure represents a “bare minimum,” implying the actual output and value could be “several times higher.”
The Taylor factory, a cornerstone of Samsung Chairman Jay Y. Lee’s strategy to expand beyond memory chips into contract chip manufacturing, had reportedly secured virtually no customers until this agreement. An analyst at NH Investment & Securities, Ryu Young-ho, described the order as “quite meaningful” for Samsung’s logic chip revenue. This comes after Reuters reported in October that Samsung had postponed deliveries of ASML chipmaking equipment for the Texas facility due to a lack of major customers, pushing the plant’s operational start to 2026.
While the deal is a significant win for Samsung’s foundry business, which holds an 8% share of the global market compared to TSMC’s 67%, it faces profitability challenges. Analyst Pak Yuak of Kiwoom Securities estimates the deal will help mitigate losses for Samsung’s foundry division, which exceeded 5 trillion won (approximately $3.6 billion) in the first half of the year.
Regarding production timelines, no specific date was provided for the AI6 chip. However, Musk previously stated that the preceding AI5 chips would enter “buying production” by the end of 2026. This suggests AI6 would follow thereafter, with SK Securities analyst Lee Dong-ju anticipating production in 2027 or 2028. It’s worth noting that Tesla has a history of missing production targets. Currently, Samsung manufactures Tesla’s AI4 chips, which power its Full Self-Driving (FSD) driver assistance system, while TSMC is expected to produce the AI5 chips, initially in Taiwan and later in Arizona, according to Musk.
The deal’s potential connection to ongoing U.S.-South Korea trade negotiations was raised, as Seoul seeks U.S. partnerships in chips and shipbuilding amidst efforts to reduce or eliminate potential 25% U.S. tariffs. However, a South Korean trade ministry official stated they had no information linking this specific agreement to the broader trade discussions.