Tesla (TSLA) and AMD (AMD) are working together to develop a self-driving chip for its vehicles. We previously implied that at some point Tesla stock would implode, but this news is very bullish. With the news Tesla is getting closer to having its own chip for handling autonomous driving tasks in its cars.

The carmaker has received back samples of the first implementation of its processor and is now running tests on it, said a source familiar with the matter.

The effort to build its own chip is in line with Tesla’s push to be vertically integrated and decrease reliance on other companies.

But Tesla isn’t completely going it alone in chip development, according to the source, and will build on top of AMD intellectual property.
AMD shares spiked after being discovered that the company is working with Tesla. Shares of the stock ended the day nearly 5 percent higher and continued to climb after hours.

On Wednesday Sanjay Jha, CEO of AMD spin-off and chip fabricator GlobalFoundries, said at the company’s technology conference in Santa Clara, California, mentioned Tesla as an example of companies that were working with fabricators. GlobalFoundries, which fabricates chips, has a wafer supply agreement in place with AMD through 2020.

In a statement, GlobalFoundries said the company does not comment on customers or potential customers, and denied Jha said that the company was working directly with Tesla.
A more power-efficient purpose-built chip could help Tesla get closer to delivering totally autonomous driving. Tesla CEO Elon Musk promised this year that capability will be available to consumers in 2019.

Current Tesla vehicles use Nvidia (NVDA) graphics processing units as part of the Autopilot self-driving hardware. Previously Tesla used chips from Mobileye, but the two companies parted ways last year after an accident involving a Mobileye-powered Tesla. Earlier this year Intel (INTC) acquired Mobileye for more than $15 billion. The Tesla and AMD partnership could be exactly what the company needs to reach profitability by 2020.


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