Finance
Samsung Electronics shares extend gains after Tesla deal, but challenges remain
Published by Global Banking and Finance Review
Posted on July 29, 2025
3 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on July 29, 2025
3 min readLast updated: January 22, 2026
Samsung Electronics shares rose after a $16.5 billion AI chip deal with Tesla. Despite gains, Samsung faces challenges in chip manufacturing and competition with TSMC.
By Hyunjoo Jin and Zaheer Kachwala
Seoul (Reuters) -Shares in Samsung Electronics eked out small gains on Tuesday, following a sharp rally the previous day after the South Korean technology company clinched a $16.5 billion deal to supply artificial intelligence chips to Tesla.
Analysts said the agreement could bolster the company's unprofitable contract manufacturing business, but Samsung faces challenges in securing additional large customers both for logic chips and memory chips where it struggles against TSMC and SK Hynix.
"This new deal breathes some much-needed life into the business and may signal the start of a turning point for Samsung, but its memory business will need to make considerable progress too," Ben Barringer, global technology analyst at Quilter Cheviot, said.
Samsung Electronics, the world's top memory chip maker, has suffered delays in supplying the latest high-bandwidth memory (HBM) chips to key U.S. customer Nvidia, a setback that has dented its profits and weighed on its stock.
In its "foundry" or contract manufacturing business, where it manufactures logic chips designed by customers, Samsung remains a distant second to market leader TSMC.
"Whether this will open the door for additional large customers will depend heavily on its execution," Barringer said.
Shares of Samsung recovered from early losses to close 0.3% higher on Tuesday, lagging the broader market's 0.7% gain. The shares were down more than 2% earlier in the session after surging nearly 7% on Monday, following the Tesla deal.
Meanwhile, Samsung Electronics Chairman Jay Y. Lee departed for Washington on Tuesday. A Yonhap News Agency report said he was expected to support trade talks between South Korea and the U.S. but a company spokesperson, when contacted by Reuters, described it as "business trip", with no further details.
While South Korea has been promoting partnerships in chips and shipbuilding with the U.S., a trade official said the Tesla deal was unrelated to ongoing trade talks aimed at reducing U.S. tariffs. Analysts, however, said the deal could enhance prospects for Samsung's investments in its Texas-based new chip factory.
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Tesla CEO Elon Musk said late on Sunday that Samsung's new chip factory in Taylor, Texas, would make the auto company's next-generation AI6 chips, likely to be used in self-driving cars, humanoid robots and data centers, without elaborating on the timing of the production.
The deal comes as Samsung has struggled to win major customers for its new Texas factory, partly due to low production yields of its cutting-edge chips.
"There also has to be a chance that the company was able to strike the long-term deal on favourable terms, given that Samsung needed to prove its contract manufacturing capabilities," said Russ Mould, investment director at AJ Bell.
The long-term supply deal for a key technology from a U.S. factory would "lessen the risk of supply-chain dislocations or tariff friction," he said.
"Samsung now needs to prove it can deliver in the right volume to the right quality for what is likely to be a demanding customer."
While the deal is "more about securing the longer-term future, we won't see these in cars for at least a year or two," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
(Reporting by Hyunjoo Jin in Seoul and Zaheer Kachwala in Bengaluru, Additional reporting by Heekyong Yang and Jihoon Lee in Seoul;Editing by Ed Davies and Jacqueline Wong)
A partnership in business is a formal arrangement where two or more parties agree to manage and operate a business together, sharing profits and liabilities.
Memory chips are electronic components that store data for computers and other devices. They are crucial for the performance and speed of electronic systems.
Contract manufacturing is an outsourcing arrangement where a company hires another firm to produce its products or components, allowing for cost savings and efficiency.
Artificial intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and learn. It is used in various applications, including data analysis and automation.
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