Samsung announced on Monday that it has secured a 22.8 trillion won ($16.5 billion) order to supply artificial intelligence (AI) semiconductors to a major undisclosed customer, later confirmed to be U.S. tech giant Tesla.
Tesla’s CEO Elon Musk said the deal involves sourcing chips from Samsung Electronics, a move expected to bolster the South Korean tech giant’s loss-making contract manufacturing business.
Following the announcement, Samsung’s shares jumped 6.83 percent to their highest since September last year. Meanwhile, Tesla shares were up 3.52 percent.
Texas factory will make Tesla’s AI6 chip
In a regulatory filing, the South Korean tech giant said it signed a foundry contract set to be completed by December 31, 2033. The contract represents 7.6 percent of Samsung Electronics’ total revenue of 300.9 trillion won last year and marks the largest chip order ever won by Samsung Electronics.
Musk said Samsung’s new chip factory in Taylor, Texas, will make Tesla’s next-generation AI6 chip.
“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. And the fab is conveniently located not far from my house,” Musk said in a post on X on Monday.
“The $16.5B number is just the bare minimum. Actual output is likely to be several times higher,” he said in another post.
Read: Tesla shares dive 7 percent as Q2 sales decline, auto revenue drops to $16.7 billion
Samsung projects 56 percent drop in Q2 operating profit
While no timeline was provided for the AI6 chip’s production, Musk previously said that next-generation AI5 chips will be produced at the end of 2026, suggesting AI6 would follow. Samsung currently makes Tesla’s AI4 chips, which power its full self-driving driver assistant system, while TSMC is slated to make the AI5, initially in Taiwan and then Arizona.
“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,” he said.
In its earnings guideline released earlier this month, Samsung Electronics estimated an operating profit of 4.59 trillion won and sales of 74 trillion won for the second quarter. Samsung is due to report its earnings on Thursday, projecting a 56 percent drop in second-quarter operating profit, partly due to widening losses of its foundry business.
