Tesla signs $16.5B deal with Samsung to make AI chips

In a significant move for the future of automotive technology, Tesla has finalized a monumental agreement worth $16.5 billion with Samsung to produce its upcoming AI chips. Elon Musk took to X late Sunday to announce that Samsung's expansive new fabrication plant in Texas will be dedicated to manufacturing Tesla’s next-generation AI6 chip. He emphasized the strategic implications of this partnership, stating, "The strategic importance of this is hard to overstate." The AI6 chip, also referred to as Hardware 6, represents Tesla's ambitious vision of an all-in-one chip capable of powering various technologies, from its Full Self-Driving (FSD) systems to the Tesla Optimus humanoid robots, as well as facilitating high-performance AI training in data centers. Musk also revealed that Tesla is collaborating with TSMC for the production of its AI5 chips, which have recently completed their design phase. Initially, the A15 generation chips, which focus primarily on FSD, will be manufactured at TSMC's facilities in Taiwan before transitioning to its Arizona plant. Samsung has already been producing the A14 chip, according to Musk, marking a significant milestone in their partnership. This deal marks a crucial turnaround for Samsung, which has faced challenges in establishing its chip-making endeavors and attracting major clients. Musk hinted that Tesla’s investment in Samsung chips could surpass the initial $16.5 billion estimate, stating, "Actual output is likely to be several times higher." Additionally, Musk mentioned that Samsung has agreed to collaborate with Tesla in optimizing manufacturing efficiency. He noted, "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." Since shifting from Nvidia’s Drive platform to its own custom chips in 2019, Tesla has significantly expanded its focus on chip development, culminating in the launch of the FSD chip, or Hardware 3, that year across its entire electric vehicle lineup. This latest foray into AI chip production underscores Tesla’s broader ambition to evolve from merely an automaker to a leader in AI and robotics.