What Happened?

Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 4% in the afternoon session after the company announced a significant, multi-billion dollar contract with Samsung Electronics to produce its next-generation AI chips. The deal, valued at approximately $16.5 billion, secured a long-term supply of semiconductors for Tesla through the end of 2033. Tesla CEO Elon Musk confirmed the partnership, stating that Samsung's new factory in Texas would be dedicated to manufacturing Tesla's next-generation "AI6" chip. These advanced chips were designed to power key future products, including the company's humanoid robots and self-driving vehicle technology. The news helped the stock recover after the company reported disappointing second-quarter financial results.

After the initial pop the shares cooled down to $327.00, up 3.4% from previous close.

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What Is The Market Telling Us

Tesla’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 3 days ago when the stock gained 3.9% as CEO Elon Musk backed a claim that the company could reach a staggering $20 trillion valuation. 

The comment, in which Musk stated that “extreme execution is needed, but a valuation of $20 trillion for Tesla is possible,” came after the stock tumbled nearly 9% in the prior session. The previous day's decline followed the company’s second-quarter earnings report, which revealed a 12% year-over-year drop in revenue, its sharpest decline in over a decade. 

Despite the recent disappointing results and concerns over short-term growth, Musk's bullish long-term forecast for Tesla's potential in AI, robotics, and autonomous driving appeared to resonate with investors, sparking a rebound in the share price. Separately, Business Insider reported that Tesla's robotaxi service will launch in San Francisco before the end of the week. While the initial launch is expected to include safety drivers, the mere presence of the service in a major urban center like San Francisco represents a crucial step forward in Tesla's ambitious robotaxi plans, suggesting progress in a key area of future growth.

Tesla is down 13.8% since the beginning of the year, and at $327.00 per share, it is trading 31.9% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $3,322.

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