Tesla signs $16.5bn chip deal with Samsung as Musk targets next-gen AI chips

The National

4 days ago

Tesla has signed a $16.5 billion agreement with Samsung Electronics to source chips in a move expected to boost the South Korean tech giant's loss-making contract manufacturing business, according to reports.
The electric vehicle maker's chief executive Elon Musk confirmed a deal, saying that 'the strategic importance of this is hard to overstate'.
The chips will be manufactured at Samsung's upcoming fabrication plant in Taylor, Texas, with the facility likely dedicated to producing the electric vehicle maker's next-generation AI6 chip, reported Reuters.
Mr Musk added that Tesla would assist Samsung in improving manufacturing efficiency and plans to 'walk the line personally' to accelerate progress at the fab, located near his Texas residence.
Samsung had previously announced the deal without naming the client, citing confidentiality.
However, three sources confirmed to Reuters that Tesla is the customer. The deal will run through the end of 2033.
Samsung shares jumped more than 4 per cent after the news broke, amid hopes the partnership could revive its foundry division, which Reuters reports has posted losses of more than $3.63 billion in the first half of this year.
Analysts say Samsung has struggled to keep pace with rivals like TSMC and SK Hynix in producing advanced AI chips, and the Tesla deal could help restore credibility and competitiveness to its semiconductor operations.
The agreement also signals a shift in global chip dynamics, as the US works to reduce its reliance on Taiwan and China by investing in domestic semiconductor production.
For consumers, the tie-up could accelerate the rollout of smarter, AI-powered Tesla vehicles, potentially with greater onboard computing and autonomy.
Economically, the deal strengthens both Tesla's supply chain resilience and Samsung's role in the race to power next-generation AI infrastructure.
Wider supply chains
For Gulf countries that are investing heavily in semiconductors and artificial intelligence, the move underscores the importance of establishing strategic partnerships within the global chip supply chain.
In May, the UAE and US launched the AI Acceleration Partnership, which includes plans for a 5-gigawatt AI campus in Abu Dhabi, known as Stargate UAE.
The agreement enables the UAE to obtain advanced CPUs and GPUs from US companies, which are essential for building up domestic AI infrastructure.
UAE officials said the deal as part of a trusted strategic partnership.
'The UAE welcomes President Trump's AI Action Plan and is ready to fast-track our strategic AI partnership with the US,' Yousef Al Otaiba, UAE Minister of State and ambassador to the US, said last Wednesday.
He added that the UAE is 'working closely with leading US companies to adopt and scale American technology in the UAE and beyond.'