Samsung shares reportedly rise after mysterious Tesla AI chip deal

In a remarkable breakthrough, Samsung Electronics saw modest gains on Tuesday, building on a sharp rally from the previous day after securing a major $16.5 billion agreement to supply AI chips to Tesla.

This deal marks a significant boost for the South Korean tech giant’s struggling contract manufacturing business, known as its “foundry” division.

However, analysts have cautioned that the tech giant still faces hurdles in expanding its client base, particularly in areas where competitors like TSMC and SK Hynix dominate.

A global technology analyst at Quilter Cheviot, Ben Barringer, noted that the Tesla contract could act as a turning point for Samsung.

“This new deal breathes some much-needed life into the business,” he said, but added that the company’s memory chip division also needs substantial improvement to fully capitalise on future opportunities.

Despite being the world’s leading memory chip maker, Samsung has recently struggled to meet demand for its latest high-bandwidth memory (HBM) chips, particularly for Nvidia, one of its key US customers. 

These supply issues have hurt its profitability and dampened investor confidence.

Notably, in the contract chip manufacturing space, Samsung continues to trail behind market leader TSMC.

While the deal is not linked to US-South Korea trade negotiations, it might still benefit Samsung’s chip operations in Texas.