Samsung Electronics has secured a landmark $16.5 billion contract to supply semiconductors to Tesla, marking one of the largest chip deals in the electric vehicle and AI sectors.

The agreement, effective from July 26, 2025, will run through December 31, 2033, according to a regulatory filing by Samsung and a confirmation post by Tesla CEO Elon Musk on X.

Although Samsung initially withheld the counterparty’s name, citing a confidentiality request “to protect trade secrets,” Musk later confirmed on X that Tesla is the customer.

“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip,” Musk wrote. “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.”

Musk added that Tesla will actively participate in optimizing Samsung’s chip production.

“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,” he said.

He also suggested the actual value of the agreement could exceed $16.5 billion.

A Strategic Bet on AI and EV Hardware

The new deal gives Tesla a critical hardware edge in its race to dominate the AI-driven electric vehicle space. The AI6 chip is believed to power Tesla’s next-generation Full Self-Driving (FSD) and AI inference systems, potentially transforming the company’s vehicles into more autonomous, intelligent machines. Samsung, in turn, gains a marquee client and a fresh opportunity to regain ground in the AI semiconductor race — an area where it has recently fallen behind rivals like SK Hynix and Micron.

The agreement is a boost to Samsung’s foundry business, which has seen sluggish orders in recent quarters and has struggled to match AI demand for memory chips. As recently as April, the company had set a goal to start mass production of 2-nanometer chips, the most advanced manufacturing node currently in development. These chips feature smaller, more compact transistors, delivering greater processing power and energy efficiency — key requirements for high-performance AI workloads.

South Korean media have also speculated that Qualcomm may soon join Tesla in placing orders for chips manufactured on Samsung’s 2nm technology.

Samsung Rallies on News Despite Tough Earnings Outlook

Investors cheered the Tesla news, sending Samsung’s shares soaring more than 6% on Monday, their highest level since September 2024. The deal comes just days ahead of Samsung’s scheduled earnings release on Thursday, where the company is expected to report a more than 50% drop in second-quarter profit. Analysts attribute the sharp decline to underwhelming foundry orders and weak memory chip sales, particularly in high-bandwidth memory (HBM), where Samsung trails rivals.

While SK Hynix has emerged as the lead supplier of HBM chips to AI giant Nvidia, Samsung has reportedly struggled to get its latest HBM offerings certified. A recent report indicates that Nvidia’s validation of Samsung’s new HBM chips has been postponed until at least September, further delaying its attempt to regain footing in a fiercely competitive market.

Foundry Wars and AI Chip Race Intensify

Samsung’s renewed push in the foundry space — particularly with U.S.-based manufacturing — appears to be a calculated move to gain ground against Taiwan Semiconductor Manufacturing Company (TSMC), the dominant force in global chip fabrication. TSMC is currently building out major operations in Arizona and has already secured Tesla’s AI5 chip production.

Samsung now ensures it will remain integral to Tesla’s long-term roadmap by securing the AI6 chip order, especially as competition in AI hardware intensifies. With governments and corporations increasingly seeking supply chain resilience and geographic diversification, Samsung’s U.S. fab in Texas is positioned to play a central role.

But the company isn’t out of the woods yet. Despite the Tesla deal, Samsung warned in its filing that investors should exercise caution, noting that “main contents of the contract have not been disclosed… and there remains a possibility of changes or termination.”

Nevertheless, the strategic value of the partnership cannot be overstated. It is expected to secure the chip supply for Tesla’s future vehicles and AI systems. For Samsung, it’s a chance to reassert itself as a top-tier player in both the foundry and AI semiconductor race, at a time when tech giants are scrambling for silicon.