Tesla and Samsung Electronics have entered a landmark $16.5billion supply agreement that will see Samsung manufacture next-generation artificial intelligence (AI) chips for Tesla’s advanced vehicles and self-driving systems. This multiyear deal, confirmed by Elon Musk on July 28, 2025, marks one of the largest contracts in the global semiconductor industry and signals a new phase of collaboration between automotive and high-tech manufacturing giants.
Deal Highlights
Value & Duration: The contract, worth $16.5billion, extends through 2033 and will supply Tesla with custom AI6 chips, which are critical to powering Full Self-Driving (FSD) technology and advanced computing systems within Tesla vehicles.
Manufacturing Hub: Samsung’s state-of-the-art chip fab in Taylor, Texas, will be dedicated to producing these semiconductors. Elon Musk noted that Tesla will directly assist Samsung in optimizing the plant’s manufacturing efficiency, underscoring the partnership’s depth and technical significance.
Technology Leap: These advanced chips are expected to dramatically improve Tesla’s AI and autonomous driving capabilities, providing higher processing speeds, better energy efficiency, and enhanced neural network support for real-time vehicle decision-making.
Financial Impact: News of the deal sent both companies’ shares upward. Samsung’s stock surged up to 6.8%, while Tesla rose 4.2% as investors anticipate increased revenue and a strengthened long-term strategic position for both companies in their respective industries.
Implications for the Tech & Automotive Sectors
AI and Autonomous Vehicles: The chips produced under this agreement will be foundational to Tesla’s upcoming fleet of self-driving and AI-powered vehicles. They replace the AI4 architecture used in current FSD systems, forming the backbone for greater autonomy and next-generation vehicle intelligence.
Semiconductor Industry: The deal is a major win for Samsung’s foundry division, elevating its position against rivals like TSMC in the highly competitive advanced node semiconductor manufacturing sector.
US & Global Market: With the chips being fabricated in Texas, the agreement supports ongoing efforts to regionalize chip production, reducing dependence on overseas facilities and reinforcing supply chain resilience for American and global automakers.
Quotes & Context
Elon Musk addressed the partnership, emphasizing that “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” and stated he intends to “walk the line personally,” reflecting Tesla’s hands-on approach to chip development and manufacturing.
The partnership not only secures Tesla’s future roadmap in AI and autonomous vehicles but also marks a resurgence for Samsung’s contract manufacturing business, giving both companies a significant competitive advantage in the years ahead