Why Tesla Stock Was Motoring Higher on Monday

Key Points

• Elon Musk announced the automaker had signed a chip-supply deal with a big electronics company.

• The company's custom-designed AI6 chips will be produced in Texas.

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An 11-figure deal with a prominent electronics company was the acceleration Tesla (NASDAQ: TSLA) needed for a stock price pop on Monday. The electric vehicle (EV) maker's shares were up by almost 4% in value in late-session trading, contrasting quite favorably with the slight (0.2%) decline of the S&P 500 (SNPINDEX: ^GSPC) at that stage.

Chipping away

Late on Sunday, Tesla CEO Elon Musk confirmed in a post on his X (formerly Twitter) social media platform that the company and Samsung have signed a new semiconductor deal. Valued at $16.5 billion, the deal obligates Samsung to manufacture Tesla's AI6 chip. According to Musk, the Korean company will make the semiconductor at its Taylor, Texas, chip factory.

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Image source: Getty Images.

According to Musk, the Asian company has also "agreed to allow Tesla to assist in maximizing manufacturing efficiency." The Tesla leader said he will visit the production line for the chip in person, "to accelerate the pace of progress."

In another post, Musk speculated that the dollar value of the deal could rise, since Samsung's ultimate output of AI6s could be significantly higher.

Tesla aims to use the next-generation semiconductors to power the self-driving functionalities of its vehicles, in addition to its Optimus line of robots.

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The deal is an obvious and significant victory for Samsung, which has struggled to win business for the relatively new Texas factory. I wouldn't say it's as much of a triumph for Tesla, however. That's because it'll be some time before AI6 production ramps up, and in any event the chip won't -- on its own -- reverse the company's recent slides in crucial metrics like overall revenue and vehicle and deliveries.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.