Key Points
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Tesla inked a $16.5 billion chip manufacturing deal with Samsung to produce its next-generation chips.
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The chips will be produced in Texas and are designed to enable advanced artificial intelligence (AI) features for Tesla’s vehicles and personal robotics.
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Tesla faces major near-term challenges, as sales have slipped globally.
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Shares of Tesla (NASDAQ: TSLA) climbed higher on Monday. The electric vehicle (EV) maker’s stock gained 3% as of market close, but had jumped as much as 4.6% earlier in the day. The spike comes as the S&P 500 (SNPINDEX: ^GSPC) was flat and the Nasdaq Composite (NASDAQINDEX: ^IXIC) rose 0.3%.
Tesla signed a major deal with Samsung to manufacture its next-generation AI6 chips.
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Tesla inked a massive deal with Samsung
Tesla and Samsung’s $16.5 billion deal will see the South Korean electronics giant manufacture Tesla’s chips, producing them in its new factory in Texas.
CEO Elon Musk said on X that, along with producing the chips, “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” adding that, “The $16.5B number is just the bare minimum. Actual output is likely to be several times higher.”
While it will be years before the first AI6 chips — designed to enable artificial intelligence (AI) inference for Tesla’s vehicles and personal robots — roll off the line, the news was enough to send Tesla shares higher.
Image source: Getty Images.
It’s a critical time for Tesla
The deal will help Tesla bring its vision for the future closer to reality, but it’s still a long road. In the meantime, Tesla is struggling.
The company faces increased competition from Chinese EV makers like BYD as it sees its sales sharply decline around the globe. Musk’s own foray into politics has done significant damage to Tesla’s brand. The next year will be very telling whether Tesla can find its footing once again. I have my doubts, and I continue to think the stock is significantly overpriced.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
