Tesla’s AI5 Chip Production to Ramp Up with Dual Foundry Strategy, Musk Confirms

Tesla’s Dual Foundry Approach for AI Chip Production

According to reports from Tesla’s third-quarter earnings call, CEO Elon Musk revealed that the company’s forthcoming AI5 chip will be manufactured by both Samsung and TSMC at their respective U.S. facilities in Texas and Arizona. Sources indicate this dual-foundry strategy represents a significant expansion of Tesla’s semiconductor production capabilities as the company aims for what Musk described as “excess production” of the advanced processors.

Tesla’s Dual Foundry Approach for AI Chip Production
Complementary Relationship with Nvidia
Strategic Oversupply and Multi-Use Applications
Manufacturing Partnerships and Industry Impact

The report states that Musk explicitly outlined Tesla’s manufacturing approach, confirming that Samsung will join TSMC in producing the AI5 chips. This marks a shift from earlier announcements where Musk had indicated TSMC would manufacture the AI5 while Samsung would handle its successor, the AI6. Analysts suggest this expanded manufacturing strategy could help Tesla mitigate supply chain risks while increasing production volume.

Complementary Relationship with Nvidia

During the investor call, Musk clarified that Tesla is “not about to replace Nvidia” despite developing its own AI chips. According to the analysis, Tesla will continue using Nvidia’s graphics processing units for training its AI models while deploying its custom-designed chips for vehicles and robotics applications.

“We’re not about to replace Nvidia, to be clear, but we do use both in combination,” Musk reportedly stated. The electric vehicle maker announced it has computing capacity equivalent to 81,000 of Nvidia’s H100 chips, demonstrating the scale of its AI infrastructure. Industry observers suggest this hybrid approach allows Tesla to leverage Nvidia’s established AI training capabilities while maintaining control over its specialized automotive and robotics processing needs.

Strategic Oversupply and Multi-Use Applications

Sources indicate that Tesla is deliberately planning for an oversupply of AI5 chips, with Musk stating “our explicit goal is to have an oversupply of AI5 chips.” The report suggests any chips not utilized in Tesla’s vehicles or robots could be deployed in the company’s data centers, providing flexibility in resource allocation.

The AI5 chip, first announced in 2024 at Tesla’s shareholder meeting, represents the latest version of the company’s Autopilot hardware that processes signals required for self-driving features. According to industry analysts, the chip’s design fits on a “half reticle,” making it approximately half the size of “full reticle” AI chip designs from competitors like Nvidia and Advanced Micro Devices.

Manufacturing Partnerships and Industry Impact

The manufacturing arrangement continues Tesla’s growing relationship with Samsung, which reportedly secured a $16.5 billion chip contract with an unnamed client in July – later confirmed by Musk to be Tesla. This partnership, combined with the existing TSMC relationship, positions Tesla with substantial semiconductor manufacturing capacity in the United States.

Industry observers suggest Tesla’s chip development strategy reflects broader trends in the technology sector, where companies are increasingly designing custom silicon tailored to their specific needs while maintaining relationships with established semiconductor suppliers. The approach allows companies like Tesla to optimize performance for their particular applications while benefiting from the manufacturing expertise of leading foundries.

According to reports, Tesla’s chip development continues despite the departure earlier this year of former Apple engineer Peter Bannon, who previously helmed chip design for the company and led development of the Dojo supercomputer project aimed at advancing Tesla’s driverless technology.