The US-based Automobile company, Tesla (TSLA.O), and the South Korean company Samsung have signed a $16.5 billion deal on July 28. The electronics company, Samsung Electronics (005930.KS), has signed a deal with the wealthiest man in the world to supply its chips to TSLA. Moreover, this contract has shown its positive effects on the sales and stocks of both companies. According to the latest records, Samsung Electronics has observed a 6.80% rise in its stock just after the deal. It observed such a hike last year in September, and now, it has achieved this milestone in July 2025. Apart from this, Tesla (TSLA.O) has observed a 1.90% rise in its stock after a consistent fall.
Samsung’s new Chip Factory in Texas
Elon Musk and Samsung’s deal will facilitate Tesla with its chips, which will be used to create a new generation of products. These chips will be the medium for the production of the AI6 Chips of Tesla, which will revolutionize electronics development. However, the project was on hold for a long time, as Samsung was facing issues in retaining clients.
On July 28, Elon Musk posted a message on X, which updated the current position of the $16.5 billion deal. Elon Musk has initiated a proposal to accompany Samsung in the manufacturing of the chip factory required for the project. Moreover, the manufacturing unit is very close to Musk’s home in Taylor, Texas, making it convenient for him to manage.
The same day, another post carried a message from Elon Musk on X. It said that the $16.5 billion deal is the beginning and will multiply in the form of output. On this deal, several analysts, like one from NH Investment & Securities, have explained how this deal is very meaningful. According to him, the deal has initiated an order for Samsung, which has been struggling to retain any clients.
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Timeline for the Chip Production by Samsung’s Chip Factory
Earlier, Elon Musk had said about the potential production time for the AI6 Chips, although not confirm its timeline. The AI6 Chip production was expected to be completed by 2026, which will be used in upgrading Tesla’s smart systems. Moreover, some analysts believe that the chip production might not be completed by 2026. According to them, this might happen because Tesla has missed its targets for the projects many times before as well.
Furthermore, Musk has mentioned that Samsung has manufactured the AI4 chips used in the Full Self-driving system of Tesla. Apart from that, the AI5 chip production was the responsibility of TSMC, which was producing them in Taiwan and, after that Arizona.
While Samsung is counted among the top memory chip producers, it is far behind TSMC in the global market. Moreover, dealing with Tesla will allow it to expand its boundaries from memory and logic chips to contract chips. Furthermore, when the deal was first signed for chip manufacturing, Samsung refused to reveal the name for confidentiality reasons. Both companies revealed their deal with each other in July 2025, which will continue till 2033.
Will the project help Samsung’s Foundry Business?
Samsung has not reported its earnings on Thursday yet and is under immense pressure from AI chips production. The company is drowning under the pressure and competition given to it by its rivals, TSMC and SK Hynix. Moreover, this competition and the necessity to produce AI chips for Tesla have caused a fall in its share price.
Furthermore, the company is facing a consistent loss in its foundry business, which has caused a 56% fall in profits. Some analysts believe that the company will cover its losses soon after the $16.5 billion deal with Tesla. Samsung has faced an interfering competition from TSMC, which has taken away many of the deals from its hands. Therefore, the company has faced tough times in client retention and suffered through losses.
Additionally, some analysts believe that Samsung is trying to collaborate with the US-based companies. It is trying to establish relations with these companies with the hope of relaxation of the 25% tariffs.
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Conclusion
The Samsung-Tesla deal has a lot more significance than you see on the screen, as it is a necessity for both companies. Therefore, Elon Musk has been assisting the company in the chip manufacturing unit, which will accelerate the growth of Tesla. On the other hand, the deal will help Samsung to cover its loss in its foundry business due to a lack of major clients.
