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Investing.com -- Tesla (NASDAQ:TSLA) CEO Elon Musk said Monday that the company has struck a $16.5 billion chip supply agreement with Samsung Electronics (KS:005930), a deal that could provide a major boost to the South Korean firm’s unprofitable contract chip manufacturing division.
The news sent Samsung shares up nearly 7%, while Tesla climbed 1.7% in U.S. premarket trading.
“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate," Musk wrote Monday on X.
Musk was likely referring to Samsung’s facility under construction in Taylor, Texas. The partnership could breathe new life into the project, which has experienced delays as Samsung has struggled to secure high-profile clients.
"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," Musk added.
While a specific timeline for the AI6 chip wasn’t disclosed, Musk has previously said that production of the next-generation A15 chip would begin in late 2026, implying that the AI6 may follow thereafter.
Samsung currently produces Tesla’s A14 chips, used in its Full Self-Driving (FSD) system. Taiwan Semiconductor Manufacturing (NYSE:TSM), meanwhile, is set to manufacture the upcoming AI5 chips—first in Taiwan and later in Arizona, according to Musk.
The Korean tech giant initially disclosed the $16.5 billion supply agreement without naming Tesla, citing the client’s request for confidentiality. The contract will run through the end of 2033.
It remains unclear whether this deal is tied to trade discussions between the U.S. and South Korea. Seoul is pursuing chip and shipbuilding partnerships with Washington as it works to prevent the imposition of possible 25% U.S. tariffs.
The agreement comes as Samsung faces mounting pressure in the foundry space, where it has been losing ground to rival TSMC amid ongoing challenges in producing cutting-edge chips for top clients such as Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA).