Tesla shares rose 7%, adding roughly $86 billion to the company's market capitalisation, after chief executive Elon Musk announced that the carmaker's chip design team had completed the tape out of its next-generation AI5 artificial intelligence processor.
A tape out marks the final stage of chip design, after which the layout is sent to a foundry for fabrication, signalling the chip is ready for manufacturing.
The move made Tesla the best performer among the Magnificent Seven technology stocks on a day of broader strength across the sector; Microsoft followed with a 3.7% gain.
Musk wrote on X that AI6, Dojo3 and other chips were also under development, and thanked Samsung Electronics and TSMC for their roles in bringing AI5 to production.
Tesla plans to split manufacturing of the chip between Samsung's fabrication plant in Taylor, Texas and TSMC's Arizona facility, with first silicon samples expected later this year and high-volume production targeted for mid-2027.
Musk said a single AI5 chip delivers roughly five times the useful compute of a dual system-on-chip AI4 configuration, with key metrics improving by around 40 times over the previous generation, including nine times the memory and eight times the computing capacity.
The chip is designed to serve as an inference processor optimised for neural network models with fewer than 250 billion parameters.
In a significant strategic clarification, Musk said the existing AI4 hardware already deployed in hundreds of thousands of vehicles is sufficient to achieve autonomous driving safety levels well above human performance.
AI5 will instead be directed primarily toward Tesla's Optimus humanoid robot programme and large-scale training clusters, avoiding costly retrofits across the existing fleet.
Tesla's Cybercab, the dedicated robotaxi scheduled to begin production this month, will launch on the current AI4 hardware rather than waiting for the newer chip.
Musk has outlined an aggressive development cadence, targeting a new chip generation reaching volume production roughly every 12 months, with AI6 tape out expected in December 2026.
Samsung has a $16.5 billion long-term agreement with Tesla to manufacture the AI6 chip, which is expected to double AI5's computing power and is optimised for edge computing in the Optimus robot and the robotaxi programme.
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UBS also upgraded Tesla to neutral from sell on the same day, citing improved risk-reward and potential long-term value from the company's autonomous vehicle and robotics efforts, with a price target of $352.
Tesla is scheduled to report first quarter 2026 financial results next Wednesday, 22 April, with analysts estimating earnings per share of $0.37.
The recap
- Tesla's chip team completed the AI5 tape out.
- Shares rose as much as 8% intraday after the announcement.
- Tesla will report first quarter 2026 results next Wednesday.
