Tesla, Inc. (NASDAQ:TSLA) chief Elon Musk announced that Samsung Electronics Co., Ltd. (OTC:SSNLF) will now co-produce the automaker’s next-generation artificial intelligence chip, the AI5.

The move signals a major win for Samsung as it vies for market share against the key contract chip manufacturer, Taiwan Semiconductor Manufacturing Co. (NYSE:TSM).

Musk Revises Previous Manufacturing Plans

During Tesla’s third-quarter investor conference call on Wednesday, Musk explicitly corrected his own previous public statements, which had indicated that Taiwan Semiconductor would be the sole manufacturer for the AI5 chip, Bloomberg reported on Thursday.

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Tesla designs these specialized AI chips to power its autonomous driving features and its developing line of robots, using them alongside processors from Nvidia Corporation (NASDAQ:NVDA).

In July, Musk confirmed reports of a $16.5 billion deal for Samsung to manufacture Tesla’s future AI6 chip. At that time, he noted that while Samsung was already producing the older AI4 chip, Taiwan Semiconductor would handle the AI5--a plan that has now evolved to include both manufacturing giants.

While still a distant second to Taiwan Semiconductor, the South Korean firm is making substantial investments in a new production hub near Austin, Texas, where Tesla is also headquartered.

AI Fuels Samsung’s Profit Surge

Samsung looks to report its largest quarterly profit in more than three years. The intense demand for AI hardware has significantly boosted sales of Samsung’s specialized High-Bandwidth Memory (HBM) while also constraining the supply and driving up prices for its core business of conventional memory chips.

CLSA Securities Korea and Counterpoint analysts attributed the success to several key factors. Samsung’s HBM shipments surged dramatically. This, combined with strong demand from both AI and general-purpose servers, has pushed prices for standard DRAM and NAND chips.

Looking ahead, Samsung is solidifying its market position for future growth. The company recently secured a critical win by getting its latest HBM chips approved for use in Nvidia’s advanced AI systems.

Price Action: TSLA stock was trading lower by 3.30% to $424.48 at last check Thursday. TSM was up 0.84%.

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