Samsung soars after Elon Musk says Tesla signed a deal to buy $16.5 billion in new AI chips

Shares of Samsung Electronics had their best day of the year, rising 6.8% during trading in South Korea after the electronics giant announced a $16.5 billion chip manufacturing deal.

Loose terms of the agreement, which runs through 2033, were detailed in a release from Samsung — but no information on the customer was provided. Elon Musk seemingly confirmed that Tesla was the buyer on Sunday night by replying “yes” on X to a user who asked about the veracity of a report from Bloomberg News.

Per Musk, Samsung will produce Tesla’s AI6 chips, next-generation processors that are expected to enhance the company’s autonomous driving capabilities in the years to come.

Shares of Tesla are up about 2% in premarket trading.

Samsung currently makes the AI4 chips that are used in Tesla’s self-driving system. Industry leader TSMC is responsible for producing Tesla’s AI5 chips, which have yet to enter into service. Its stock is down 1% in premarket trading.

Musk also expressed optimism that the agreement would see much higher output than Samsung outlined, adding that these processors will be made at a new foundry in Taylor, Texas, which “is conveniently located not far from my house 😀.”

Samsung has not yet confirmed details as to where this order will be manufactured. Reuters has previously reported on the struggles of its Texas plant to get up and running, with Samsung delaying the start of operations and holding off on taking delivery of equipment from ASML in light of sluggish demand. ADRs of the Dutch semi equipment titan are up 3.5% as of 6:25 a.m. ET.

This deal “implies a recovery in its foundry business’ 2-nanometer generation chip production,” Bloomberg Intelligence analysts Masahiro Wakasugi and Takumi Okano wrote. “It could also lead to new contracts with other fabless chip companies.”