Tesla signs $16.5 billion deal with Samsung for next-gen AI chips

Tesla CEO Elon Musk has confirmed a landmark $16.5 billion deal with Samsung Electronics. The agreement will see Samsung produce Tesla's next-generation artificial intelligence chips, a critical component for the future of the company's electric cars and its self-driving technology.

The partnership centers on Tesla's future "AI6" chip, the brain that will eventually power the company's most advanced driver-assistance systems. These powerful processors will be manufactured at Samsung's new, state-of-the-art facility in Taylor, Texas. According to the announcement, the $16.5 billion agreement will run through the end of 2033. Elon Musk suggested this figure is just a starting point. "The $16.5B number is just the bare minimum," he noted in a post on X. "Actual output is likely to be several times higher."

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.

Samsung currently makes AI4.

TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.

— Elon Musk (@elonmusk) July 28, 2025

For Samsung, this deal is nothing short of a lifeline for its contract chip manufacturing business, also known as its foundry division. The company had invested billions in the Taylor, Texas factory, but the project has faced significant headwinds. Analysts noted the plant had "virtually no customers" lined up, and Samsung had reportedly postponed deliveries of essential chipmaking equipment from suppliers like ASML.

The lack of clients contributed to mounting financial pressure, with one analyst estimating the foundry business lost over $3.6 billion in the first half of this year alone. This Tesla contract single-handedly validates the Texas investment and provides a much-needed anchor client. The news sent Samsung's shares climbing to their highest point in nearly a year.

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 😃

— Elon Musk (@elonmusk) July 28, 2025

From Tesla's perspective, this deal is a strategic decision to diversify its suppliers for silicon that powers its EVs. Samsung currently produces the AI4 chip found in today's Tesla models. For its next step, the AI5 chip, Tesla has tapped industry leader Taiwan Semiconductor Manufacturing Company (TSMC).

By bringing Samsung back into the fold for the AI6, Tesla avoids becoming overly reliant on a single supplier. The location of the Samsung plant is also a big advantage. "The fab is conveniently located not far from my house," Musk stated, adding that he would "walk the line personally to accelerate the pace of progress."

While the deal is set, the exact timeline for production is not known. Samsung's Texas factory has already seen its operational start date pushed to 2026. Musk has previously said that the AI5 chip, made by TSMC, is scheduled for production at the end of 2026. This suggests that the Samsung-made AI6 chip would follow, with analysts from SK Securities projecting a start date around 2027 or 2028. As is often the case with ambitious technology projects, these timelines could shift, especially given Tesla's history of missing its own aggressive targets.

Samsung's foundry business holds just 8% of the global market, while its rival TSMC dominates with a 67% share, building chips for titans like Apple and Nvidia. The Tesla deal is a big win for Samsung Chairman Jay Y. Lee's strategy to expand beyond memory chips and seriously challenge TSMC's supremacy.

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