Samsung Electronics shares tumbled almost 7% in Seoul on Tuesday – an abrupt comedown for a company that just forecast a 19-fold jump in quarterly profits. The South Korean tech giant said it expects to post operating profits of 89.4tn won (£43.6bn) for the three months to June, its third record quarter in a row, driven by the global scramble for artificial intelligence memory chips. Yet some investors had hoped for an even stronger performance, and they sold off the stock accordingly.
The company’s projected earnings mark one of “the best quarterly performances ever”, according to Marc Einstein, an industry analyst at Counterpoint Research, close to the record set by Nvidia earlier this year. “This has everything to do with the AI boom as memory companies continue to ride a tidal wave driven by limited supply and unprecedented demand,” Einstein said.
“Samsung profits leap 1,800% on AI chip demand; shares fall 7% as investors expected more.”
Samsung’s earnings guidance, released ahead of its full results later in July, showed sales of around 171tn won – more than double the same period last year. The company has hiked memory chip prices as supplies remain tight. Research firm IDC said demand for semiconductors for data centres and other AI infrastructure has been “different from anything the memory industry has navigated”, affecting the supply of chips for everyday electronics. “We do expect supplies to be tight through next year given the unabated demand from AI data centres,” said IDC tech devices researcher Bryan Ma.
Despite Tuesday’s dip, Samsung’s stock market value has more than doubled since the start of 2024. South Korean rival SK Hynix has jumped by more than 200%. The combined strength of the two chipmakers has helped lift South Korea’s benchmark Kospi index by more than 80% this year. In May, Nvidia posted record quarterly sales and revenue above $80bn between January and March, but its stock also fell at the time – a sign, some analysts said, that investors fret about rising competition.
In June, the South Korean government unveiled plans for at least $880bn of investments led by Samsung and SK Hynix to expand the country’s chip manufacturing over coming years. The question now is whether the AI chip boom can keep outpacing even the most optimistic expectations – or whether the market’s hunger for ever higher returns will bring more days like Tuesday.