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

In a landmark strategic move set to reshape the landscape of artificial intelligence hardware, Tesla has officially inked a staggering $16.5 billion deal with Samsung to manufacture its next-generation AI chips. This colossal agreement underscores Tesla’s unwavering commitment to advancing its autonomous driving capabilities and expanding its footprint in the burgeoning AI and robotics sectors.

The monumental partnership was confirmed by Tesla CEO Elon Musk himself, who announced on X (formerly Twitter) that “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip.” He further emphasized the profound significance of this collaboration, stating, “The strategic importance of this is hard to overstate.” This dedicated facility in Texas will be crucial for scaling the production of these advanced semiconductors.

Tesla’s AI6, also known as Hardware 6, represents a pivotal leap in the company’s chip design philosophy. This all-in-one chip is engineered for versatile scalability, designed to power everything from Tesla’s Full Self-Driving (Supervised) system to its ambitious Optimus humanoid robots, and even high-performance AI training within data centers. This holistic approach signals Tesla’s vision of integrating advanced AI across its entire ecosystem.

While the focus shifts to AI6 with Samsung, Musk clarified that Tesla is also collaborating with TSMC for its AI5 chips. The AI5, primarily developed for FSD applications, has just completed its design phase and will initially be produced in TSMC’s Taiwan factory before moving to its Arizona facility. Notably, Samsung already handles the manufacturing of Tesla’s current A14 chip, cementing a long-standing relationship between the two tech giants.

This deal is a significant boon for Samsung, providing a robust client and scale for its chip-making operations, particularly after facing challenges in attracting major clients to its new fabs. Elon Musk hinted at an even larger scale, suggesting that “Actual output is likely to be several times higher” than the initial $16.5 billion investment, indicating the potential for a far more extensive partnership.

Further solidifying the strategic alliance, Musk revealed that Samsung has agreed to allow Tesla to actively 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 posted, highlighting his direct involvement and the strategic positioning of the Samsung facility.

Tesla’s journey into custom silicon began in 2019 when it transitioned from Nvidia’s Drive platform to its own bespoke chip, the FSD Computer (FSDC) or Hardware 3. This chip, also manufactured by Samsung, integrated two duplicate systems for redundancy, a crucial safety feature for autonomous driving. Since then, Tesla’s commitment to in-house chip development has intensified, aligning with its overarching ambition to evolve from a mere automaker into a leading AI and robotics company.