Samsung Signs $16.5 Billion Deal with Tesla for AI Chip Production in Texas

Samsung has signed a $16.54 billion deal with Tesla to manufacture AI chips in Texas until 2033. The contract is a major win for Samsung's US foundry business and sent shares up 6.8% on Monday. The deal will enable Samsung's new Texas fabrication plant to focus on producing chips used in AI data centers and robots. Tesla CEO Elon Musk confirmed the deal and highlighted the strategic importance of the partnership.

Samsung Electronics has signed a $16.54 billion deal with Tesla to manufacture AI chips in Texas until 2033, marking a significant win for the company's US foundry business. The contract, announced on Monday, sent Samsung's shares up by 6.8%, reaching their highest level since September 2024. The deal will enable Samsung's new Texas fabrication plant to focus on producing chips used in AI data centers and robots.

The agreement, which runs through the end of 2033, involves the production of Tesla's next-generation AI6 chip. Tesla CEO Elon Musk confirmed the deal and highlighted its strategic importance, stating that the value of the deal is "just the bare minimum" and that actual output is likely to be several times higher. Musk also announced that he will personally walk the chip fabrication line and assist in optimizing production.

The contract is a major victory for Samsung's foundry division, which has been struggling with under-utilization and loss-making operations. The deal will help Samsung attract other clients and demonstrate its capabilities in advanced chip manufacturing. The AI6 chip will form the foundation of Tesla's self-driving hardware suite for cars in coming years.

The deal also comes as a strategic boost for Tesla, which is diversifying its chip manufacturing strategy. While TSMC is currently producing the AI5 chip, the AI6 chip will be exclusively manufactured by Samsung. This diversification reduces supply chain risks and gives Tesla access to Samsung's 2nm fabrication technology, which is crucial for next-generation AI applications.

The partnership between Samsung and Tesla is expected to have far-reaching implications for the semiconductor industry. As AI continues to drive demand for advanced chips, the ability to manufacture these chips efficiently and at scale will become increasingly important. The deal represents a strategic inflection point for Samsung, which has faced challenges in catching up to TSMC's technological lead in the AI chip manufacturing space.

For investors, the deal offers both opportunities and risks. While the contract provides a significant revenue boost and an opportunity to showcase Samsung's capabilities, the company still faces challenges in catching up to TSMC. The success of this partnership will depend on several key factors, including Samsung's ability to achieve and maintain high yield rates for its 2nm process, the effectiveness of the collaboration with Tesla in optimizing manufacturing efficiency, and the ability to attract other major clients to its foundry business.

In the evolving landscape of semiconductor manufacturing, partnerships like the one between Samsung and Tesla will become increasingly important. The coming years will reveal whether this partnership marks the beginning of a new chapter for Samsung's foundry business or if the challenges of catching up to TSMC will prove too great to overcome.

References:
[1] https://www.ainvest.com/news/samsung-16-5b-chip-deal-tesla-strategic-inflection-point-foundry-recovery-2507/
[2] https://www.bloomberg.com/news/articles/2025-07-28/samsung-bags-16-5-billion-deal-in-big-win-for-chipmaking-arm