Tesla has signed a $16.5 billion agreement with Samsung Electronics to manufacture its next-generation AI chips, a move seen as a significant boost to the South Korean tech company’s underperforming contract chipmaking business.

Announcing the deal on Sunday, Tesla CEO Elon Musk confirmed that Samsung’s new chip fabrication plant in Taylor, Texas, will produce the AI6 chips. These inference chips are expected to power Tesla’s future self-driving vehicles and its humanoid robot project, Optimus, as well as support broader artificial intelligence applications.

Samsung shares surged 6.8% on Monday following the announcement, as investors welcomed signs of momentum in its foundry business, where the company has lagged behind rivals like Taiwan’s TSMC in the fast-growing AI chip market.

Tesla shares also rose 4.2%, despite concerns over declining electric vehicle sales and a still-uncertain timeline for its autonomous driving ambitions.

Musk stated that Tesla would assist Samsung in optimising manufacturing efficiency at the Taylor site and hinted at the scale of the project. “The $16.5B number is just the bare minimum. Actual output is likely to be several times higher,” he said on social media platform X. He also noted the proximity of the plant to his residence, suggesting he would be personally involved in monitoring progress.

The AI6 chips are likely to follow the AI5 chips, scheduled for production in late 2026. This suggests a possible start date for AI6 production no earlier than 2027. Analysts remain cautious, citing Tesla’s track record of missed production targets.

Samsung’s Taylor facility, initially announced in 2021, has faced delays and has not secured major customers until now. Last year, Samsung postponed the delivery of advanced ASML chipmaking equipment for the site and pushed the plant’s operational start to 2026. The Tesla deal is considered a turning point for the factory.

“Samsung’s Taylor factory so far had virtually no customers, so this order is quite meaningful,” said Ryu Young-ho, senior analyst at NH Investment & Securities. However, he added that the contract may still represent a small share of Samsung’s annual logic chip revenue.

While the timing aligns with broader trade discussions between South Korea and the US, including efforts to avert possible 25% US tariffs, South Korean trade officials said the Tesla-Samsung deal is not currently linked to the negotiations.

Samsung is already the supplier of Tesla’s current-generation AI4 chips, while TSMC will fabricate its AI5 chips in Taiwan and later in Arizona. The shift to AI6 signals Tesla’s growing demand for advanced computing power to support its autonomous technology roadmap.