The stock of Tesla (TSLA) is up 4% on July 28 after the electric vehicle maker announced that it has entered into a $16.5 billion contract with Samsung Electronics (SSNLF) to supply it with semiconductors.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The effective start date of the contract was July 26, 2025, and its end date is Dec. 31, 2033. On social media, Tesla CEO Elon Musk confirmed the deal and wrote that “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip.” Samsung already makes the AI4 and AI5 microchips for Tesla, Musk added.
News of the deal with Tesla also gave shares of Samsung Electronics a boost, sending them up more than 6% in early trading on July 28 to reach their highest level since September 2024. Samsung’s foundry service manufactures chips based on designs provided by other companies. It is the second largest provider of foundry services behind only Taiwan Semiconductor Manufacturing Company (TSM).
Reversal of Fortune
Samsung said in April of this year that it aims to commence two-nanometer mass production in its foundry business and secure major orders for the next-generation chips and processors. Samsung, which is scheduled to deliver its quarterly earnings on July 31, expects its second-quarter profit to more than halve.
The company’s disappointing forecast is due to weak orders for its foundry business and as the company struggles to capture artificial intelligence (AI) demand for its microchips. News of the Tesla deal comes at a good time for Samsung as the company has reportedly been working to get the latest version of its HBM microchips certified by Nvidia (NVDA).
For TSLA stock, the deal is helping its share price recover after disappointing second-quarter financial results. Tesla’s share price is down 19% year to date.
Is TSLA Stock a Buy?
The stock of Tesla has a consensus Hold rating among 37 Wall Street analysts. That rating is based on 14 Buy, 15 Hold, and eight Sell recommendations issued in the last three months. The average TSLA price target of $310.65 implies 5.44% downside from current levels.
