Tesla CEO Elon Musk announced a $16.5 billion chip supply deal with Samsung Electronics, aimed at producing Tesla’s next-gen AI6 chips at Samsung’s Texas factory.

The deal is a major boost for Samsung’s struggling chip foundry business, which has faced delays and a lack of major clients.

Samsung’s shares surged on the news, while Tesla’s rose in premarket trading.

Musk said Tesla will help improve production efficiency, and actual output could exceed the initial deal value, CNN has reported.

The partnership could mark a turning point for Samsung, which lags behind chipmaking giant TSMC in the AI chip race.

Written by B.C. Begley