Seoul– Samsung Electronics (005930.KS) shares inched up 0.3% on Tuesday, following a sharp rally the previous day after securing a $16.5 billion deal to supply AI chips to Tesla (TSLA.O). Analysts say the agreement could revitalize Samsung’s struggling contract chipmaking business, but challenges remain in competing with industry leaders like TSMC (2330.TW) and SK Hynix (000660.KS) in both logic and memory chips.
While the Tesla deal provides a much-needed boost, Samsung continues to face setbacks, including delays in supplying advanced high-bandwidth memory (HBM) chips to Nvidia (NVDA.O). The company also lags far behind TSMC in the foundry business, where it manufactures custom logic chips for clients. “This deal may mark a turning point, but Samsung still needs significant progress in its memory segment,” said Ben Barringer, a global technology analyst at Quilter Cheviot.
Samsung’s shares initially fell over 2% on Tuesday before recovering, underperforming the broader market’s 0.7% gain. The stock had surged nearly 7% on Monday following the Tesla announcement. Meanwhile, Samsung Electronics Chairman Jay Y. Lee traveled to Washington, with South Korean media suggesting he would support trade talks between the two nations. However, a company spokesperson described the trip as a routine business visit without elaborating further.
The Tesla deal could bolster Samsung’s new Texas chip factory, which has faced difficulties securing major clients due to low production yields. Elon Musk confirmed that the facility will produce Tesla’s next-generation AI6 chips for self-driving cars and robotics. Analysts say the long-term agreement may help Samsung prove its manufacturing capabilities while reducing supply chain risks. “This deal could be a win-win, given Samsung’s need to demonstrate its contract chipmaking strength,” said Russ Mould, investment director at AJ Bell.