Samsung Inks $16.5B Deal with Tesla for AI Chips | Bloomberg Tech 7/28/2025

Key Concepts

• AI Chips: Specialized semiconductors designed for artificial intelligence applications.
• Foundry Business: Semiconductor manufacturing services where companies produce chips designed by others.
• Marquee Customer: A high-profile client that enhances a company's reputation and attracts other customers.
• CHIPS Act: U.S. legislation aimed at boosting domestic semiconductor manufacturing.
• AI Adoption: The extent to which countries and organizations integrate and utilize AI technologies.
• Digital Sovereignty: A country's ability to control its digital infrastructure and data.
• Auction-Style IPO: A process where prospective investors bid on shares, influencing the final IPO price.
• AI Action Plan: U.S. government initiative to promote AI innovation and adoption.
• Hybrid Reasoning Models: AI models that combine different reasoning approaches for improved performance.
• Export Controls: Government regulations restricting the export of certain technologies or products.

Samsung-Tesla AI Chip Deal

• Deal Details: Samsung will produce AI chips (AI6) for Tesla in Texas under a new multi-year agreement.
• Strategic Importance for Samsung:
  • Secures a "marquee customer" in Tesla for its foundry business.
  • Validates Samsung's ability to manufacture high-end chips for applications like self-driving technology.
  • Aims to compete with TSMC and NVIDIA in the high-margin chip market.
• Tesla's Perspective:
  • Diversifies its chip supply chain, hedging against reliance on TSMC.
  • Elon Musk indicated close involvement in the chip engineering and ramp-up process due to the proximity of the Samsung fab.
• CHIPS Act Impact: Samsung's expansion in Texas is partly driven by the CHIPS Act, enabling them to supply U.S. customers and potentially avoid tariffs.

U.S.-EU Trade Deal and Tariffs

• Agreement: The U.S. and EU reached a deal to impose 15% tariffs on most exports, including chips and cars.
• European Perspective: Avoided a potential 30% tariff that was to be imposed on August 1st.
• Sector-Specific Tariffs: The 15% rate applies to sectors including automobiles, semiconductors, and pharmaceuticals.
• Exceptions: Steel and aluminum could face a 50% tariff.
• European Investments: Europe agreed to invest $600 million in the U.S. and purchase $750 billion of American energy, along with "vast purchases" of U.S. military equipment.
• China's Position: China disputes the U.S.'s stance on export controls, viewing it as a domestic issue.

AI Race and Regulatory Landscape

• AI Adoption vs. Innovation: The discussion shifts from "who will win the AI race" (innovation) to "who will win the race on AI adoption" (implementation and usage).
• Key Aspects of AI Adoption:
  • Talented Workforce: Essential for effective AI implementation.
  • Infrastructure and Data: Robust infrastructure and data availability are crucial.
  • Governance Framework: Establishing appropriate regulations and guidelines.
• U.S. as an AI Exporter: The U.S. aims to be a net exporter of AI technologies, including hardware and software.
• Copyright Issues: Copyright is a significant concern for frontier model makers, particularly regarding training data.
• EU's AI Act: The EU's AI Act raises concerns about competitiveness, particularly regarding digital sovereignty barriers.

Tech Earnings Preview

• Key Companies Reporting: Microsoft, Meta, Apple, and Amazon are reporting earnings this week.
• S&P 500 Impact: The performance of these companies will significantly influence the S&P 500.
• Microsoft and Meta: Seen as leaders in AI and expected to show early ROI on AI investments.
• Apple: Sentiment is more negative due to a lack of a strong AI strategy, tariff exposure, and slower growth.
• Investor Expectations: Expectations are high, and companies that miss expectations are being punished by investors.

IPO Market and Figma

• Figma IPO: Figma is increasing the price of its IPO to $30-$32 per share, aiming to raise approximately $1 billion with a valuation near $20 billion.
• Conditions for VC-Backed IPOs:
  • Rate Stability: Stability in interest rates.
  • Public Market Stability: Stable and strong public market performance.
  • Successful IPOs: Recent successful IPOs of companies like Circle and Coreweave.
• Auction-Like IPO Mechanism: Figma is using an auction-like process where investors bid on shares.
• AI's Influence on IPOs: Companies leveraging AI capabilities are expected to command higher valuations.

Alibaba Cloud and AI Talent

• Alibaba Cloud's Strategy: Alibaba Cloud initially sought AI talent in Silicon Valley but found it too expensive.
• Focus on Early-Stage Innovation: The company focuses on finding talent in areas where technology is still nascent.
• Meta's AI Hiring: Meta is reorganizing its AI efforts and hiring talent for its "super intelligent" AI group.

Conclusion

The tech landscape is currently shaped by several key trends: the increasing importance of AI chips and manufacturing, the complexities of international trade and tariffs, the growing focus on AI adoption and regulation, and the potential resurgence of the IPO market. The Samsung-Tesla deal highlights the strategic value of AI chip production, while the U.S.-EU trade agreement underscores the ongoing tensions and negotiations in global commerce. The discussion on AI adoption emphasizes the need for workforce development, infrastructure, and governance. Finally, Figma's IPO attempt signals a potential thawing in the IPO market, driven by factors like rate stability and successful public offerings. The week ahead is crucial, with major tech earnings poised to significantly impact market sentiment and direction.