Tesla Signs $16.5 Billion Microchip Contract With Samsung Electronics

Samsung Electronics (SSNLF) has entered into a $16.5 billion U.S. contract for supplying semiconductors to electric vehicle maker Tesla (TSLA).

The effective start date of the contract was July 26, 2025 and its end date is Dec. 31, 2033.

On social media, Tesla Chief Executive Officer (CEO) Elon Musk confirmed the deal and wrote: “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip.”

Samsung already makes the AI4 and AI5 microchips for Tesla, added Musk.

News of the deal with Tesla sent shares of Samsung Electronics up more than 6% in early trading on July 28 to reach their highest level since September 2024.

Samsung’s foundry service manufactures chips based on designs provided by other companies. It is the second largest provider of foundry services globally, behind only Taiwan Semiconductor Manufacturing Company (TSM).

Samsung said in April this year that it aims to commence two nanometer mass production in its foundry business and secure major orders for the next-generation chips and processors.

Samsung, which is scheduled to deliver its quarterly earnings on July 31, expects its second-quarter profit to more than halve.

The company’s disappointing forecast has been due to weak orders for its foundry business and as the company has struggled to capture artificial intelligence (A.I.) demand for its microchips.

News of the Tesla deal comes at a good time for Samsung as the company has reportedly been working to get the latest version of its HBM microchips certified by Nvidia (NVDA).

Samsung’s stock, which trades over the counter in New York, has risen 32% so far in 2024.