Samsung To Make Tesla's AI Chips As Elon Musk Announces $16.5 Billion Deal

Tesla CEO Elon Musk on Monday announced a huge USD 16.5 billion supply agreement with Samsung Electronics. This is a landmark deal for both tech giants as this agreement provides a significant boost to the South Korean manufacturer, particularly for its contract chip manufacturing division, which has been experiencing huge financial losses.

The news was met with a positive market reaction as Samsung shares surged 6 per cent shortly after Musk's announcement on the social media platform X, underscoring the market's optimism about the potential for a significant jump in the company's profits.

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This is a strategic alliance between the two companies, and it shows Tesla's commitment to securing advanced AI chip production while also offering a much-needed lifeline to a key segment of Samsung's semiconductor operations.

Tesla CEO Elon Musk stated on Monday that his company had signed a USD 16.5 billion supply agreement with Samsung Electronics, a deal that could provide a big jump in profits for the South Korean chipmaker.

The deal, running through the end of 2033, provides a significant boost for Samsung's contract chip manufacturing division, which has been losing money. Samsung's shares rose over 6 percent soon after Musk announced the deal via a post on X.

Samsung's Gain: The deal is a significant boost for Samsung's contract chip manufacturing division, which has been losing money. Samsung's shares rose over 6 per cent after the news.

Texas Fab: Samsung's new factory in Taylor, Texas, which has been facing delays, will be dedicated to making AI6 chips this year. Tesla will help Samsung improve manufacturing efficiency, with Elon Musk personally overseeing the progress.

Samsung currently manufactures Tesla's A14 Full Self-Driving Chips: Tesla's choice to have both TSMC (Taiwan Semiconductor Manufacturing Company) and Samsung make its advanced AI chips (like AI5 and AI6) ensures a secure and resilient environment. It also helps boost chip production in the US.

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Tesla has a long-term plan for its AI chips. The AI6 chip, which Samsung is going to manufacture, is a future-ready chip that will be released after AI5. The A15 chips are already planned to start production in late 2026, which means Tesla's masterminds are thinking way ahead and are constantly improving the brains of its advanced systems like self-driving cars and robotics.

Samsung had initially announced a USD 16.5 billion deal without naming Tesla due to a confidentiality request.

The USD 16.5 billion chip deal between Tesla and Samsung is an important step for the companies involved, given that Tesla and Samsung play into South Korea's broader strategy to avoid potential 25 per cent US tariffs by forging a strong chip and shipbuilding partnership with the US.