Samsung Electronics has won a $16.5bn order to produce Tesla’s next generation of custom artificial intelligence chips, raising hopes of a turnaround in the South Korean tech giant’s struggling contract chipmaking business.

The eight-year contract, announced by Samsung in a regulatory filing and confirmed by Tesla chief executive Elon Musk on Monday, is the biggest deal that Samsung’s chip business has won from a single customer. Its value is equivalent to 7.6 per cent of the company’s 2024 revenue. Samsung shares rose 6 per cent on the news.

Musk wrote on his social media platform X that Samsung would produce Tesla’s next-generation AI6 chip at its new manufacturing facility in Texas, part of a $40bn investment made by the South Korean company with assistance from federal subsidies allocated under former US president Joe Biden’s Chips and Science Act.