Elon Musk confirms Tesla has signed a $16.5 billion chip contract with Samsung

• Elon Musk confirmed Tesla had signed a $16.5 billion chip contract with Samsung.
• Samsung did not name the counterparty but said that the effective start date of the contract was July 26, 2024 — receipt of orders — and its end date was Dec. 31, 2033.
• Samsung, which is set to deliver earnings on Thursday, expects its second-quarter profit to more than halve.

Samsung Electronics has entered into a $16.5 billion contract for supplying semiconductors to a major company, a regulatory filing by the South Korean firm showed Monday. Tesla CEO Elon Musk later confirmed that Samsung will make chips for Tesla.

The memory chipmaker, which had not named the counterparty, mentioned in its filing that the effective start date of the contract was July 26, 2024 — receipt of orders — and its end date was Dec. 31, 2033.

Samsung declined CNBC's request to comment on details regarding the counterparty. Tesla did not respond to a request for comment.

However, Musk confirmed that Tesla was the counterparty in a reply on his social media platform X, which was subsequently deleted.

He later posted: “Samsung's giant new Texas fab will be dedicated to making Tesla's next-generation AI6 chip. The strategic importance of this is hard to overstate. Samsung currently makes AI4.TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.”

Samsung earlier said that details of the deal, including the name of the counterparty, will not be disclosed until the end of 2033, citing a request from the second party “to protect trade secrets,” according to a Google translation of the filing in Korean.

“Since the main contents of the contract have not been disclosed due to the need to maintain business confidentiality, investors are advised to invest carefully considering the possibility of changes or termination of the contract,” the company said. Its shares were up nearly 3% in early trading.

Tesla was a probable customer, Ray Wang, research director of semiconductors, supply chain and emerging technology at The Futurum Group, told CNBC before Musk's post.

Bloomberg News had earlier reported that Samsung's deal was with Tesla, citing a source.

Samsung's foundry service manufactures chips based on designs provided by other companies. It is the second largest provider of foundry services globally, behind Taiwan Semiconductor Manufacturing Company.

The company said in April that it was aiming for its foundry business to start mass production of its next-generation 2 nanometer and secure major orders for the advanced product. In semiconductor technology, smaller nanometer sizes signify more compact transistor designs, which lead to greater processing power and efficiency.

Samsung, which is set to deliver earnings on Thursday, expects its second-quarter profit to more than halve. An analyst previously told CNBC that the disappointing forecast was due to weak orders for its foundry business and as the company has struggled to capture AI demand for its memory business.

The company has fallen behind competitors SK Hynix and Micron in high-bandwidth memory chips — an advanced type of memory used in AI chipsets.

SK Hynix, the leader in HBM, has become the main supplier of these chips to American AI behemoth Nvidia. While Samsung has reportedly been working to get the latest version of its HBM chips certified by Nvidia, a report from a local outlet suggests these plans have been pushed back to at least September.