Samsung Electronics Co. (005930.KS) has secured a major multiyear deal with Tesla Inc. (NASDAQ: TSLA) to manufacture advanced AI semiconductors at its upcoming facility in Taylor, Texas. The $16.5 billion agreement runs through 2033 and marks a crucial win for Samsung’s underperforming foundry business.
Elon Musk confirmed that the Texas fab will produce Tesla’s AI6 chip, a next-generation inference processor critical to powering autonomous vehicles and humanoid robots. Here’s a snapshot of his tweet:
Tesla Shifts from TSMC to Samsung to Diversify Supply Chain
Tesla’s decision to switch from longtime chip partner Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) to Samsung reflects a broader strategy to strengthen supply chain resilience. Tensions in Taiwan and global semiconductor shortages have prompted Tesla to explore alternative partners. Samsung’s progress in 2nm gate-all-around (GAA) chip fabrication, with yields now surpassing 40% makes it an appealing option.
This move also signals Tesla’s deeper commitment to vertical integration. By co-developing chip manufacturing processes with Samsung, Tesla is embedding itself in the heart of one of the world’s largest semiconductor ecosystems.
A Boost for Samsung’s Struggling Foundry Division
The contract comes as Samsung’s chip foundry business with the Texas fab had been facing delays. According to TrendForce, its share of the global foundry market slipped to 7.7% in Q1 2025, far behind TSMC’s 67.6%.
But the Tesla deal now provides a clear pathway to scale operations by 2026. Notably, Samsung shares surged 6.8% on Monday following the announcement, their highest level since September, as indicated by Bloomberg.
The partnership signals confidence in Samsung’s next-gen chip tech and could serve as a launchpad to secure more U.S. and global clients. Interestingly, Samsung’s role as a viable TSMC alternative also grows stronger.
New Chips, Faster Cars: Tesla’s Path to Full Autonomy
The AI6 chip, set for production at Samsung’s Texas facility, is the centerpiece of Tesla’s next-gen Full Self-Driving (FSD) platform. Elon Musk emphasized that the chip could deliver exaflop-level computing power, unlocking near-human-level decision-making for autonomous systems.
While production is still two years away, the AI6 chip plays a crucial role in Tesla’s roadmap to deploy fully driverless robotaxis and expand its AI offerings, including Optimus humanoid robots. Tesla expects these FSD-equipped vehicles could make up 30% of total sales by 2027.
Still, Musk acknowledged challenges ahead. Tesla’s current FSD offering requires driver supervision, and its early robotaxi trials in Austin have faced criticism for erratic behavior. He also noted the transition from AI4 (already made by Samsung) to AI5 (designed by TSMC) and then to AI6 could cause confusion and delays in retrofitting older vehicles.
Tesla and Samsung Eye the AI Chip Market’s Explosive Growth
A report says the AI chip industry size was valued at USD 52.92 billion in 2024 and is predicted to reach USD 295.56 billion by 2030, at a CAGR of 33.2% from 2025 to 2030.
Another analysis forecasted USD 927.76 billion by 2034, expanding at a CAGR of 28.90% from 2024 to 2034.
Tesla and Samsung’s alliance offers two key advantages in this fast-moving space:
- Higher Efficiency and Performance: Tesla can develop more efficient FSD systems using Samsung’s advanced 2nm chips, reducing costs and improving AI capabilities.
- Stronger Supply Chains: Samsung’s dual-hub strategy spanning Texas and its planned $228 billion mega-cluster in South Korea offers Tesla a reliable chip supply free from geopolitical threats.
Global Strategy Backed by U.S. and South Korea
Bloomberg revealed that this partnership aligns well with the U.S. effort to revitalize domestic semiconductor manufacturing. Supported by the CHIPS and Science Act, Samsung is set to receive up to $9 billion in U.S. funding and tax incentives for its operations in Texas. This aligns with broader efforts to reduce dependency on East Asia and strengthen American tech supply chains.
Simultaneously, the deal reinforces South Korea’s $450 billion K-Semiconductor Strategy, positioning the country as a powerhouse in AI chip innovation. By anchoring its foundry with Tesla’s contract, Samsung strengthens its role in global AI manufacturing.
All these factors combined could significantly strengthen both companies’ positions in the race toward scalable AI.
Investors Bet Big on TSLA STOCK
Tesla’s ability to commercialize its AI5 and AI6 chips will directly influence its valuation in the coming years. As its FSD system matures and becomes more widely adopted, TSLA can boost subscription revenue and capitalize on valuable driving data.
This shows that the Samsung deal is a big win for Tesla. Experts noted that it can give the company long-term access to custom AI chips that are key for its Full Self-Driving (FSD) system, robots, and data centers.
Market data showed, Tesla (TSLA Stock) shares have risen following the announcement of the major chip supply deal with Samsung. The latest available price for Tesla (TSLA) is $325.59, up about 3% from the previous close of $316.06.
This partnership also helps Tesla strengthen its supply chain and have better control over how its chips are made. And for investors, the deal is more than a headline. It’s a foundational shift in the semiconductor and AI chip tech that could redefine the self-driving and AI semiconductor race.
