Samsung Shares Hit 3-year High on Strong AI Demand

Samsung’s stock rose 2.24% to 86,500 won on Friday after a Q2 profit forecast of 10.4 trillion won, surpassing estimates due to high memory prices

Samsung Electronics shares surged to their most excellent level since January 2021 after the South Korean technology company disclosed that it anticipates a higher-than-anticipated profit for the second quarter, primarily due to the burgeoning demand for artificial intelligence.

According to data from LSEG, the stock hit a high of 86,500 Korean won ($62.73) on Friday morning, representing a 2.24% increase. On Thursday, Samsung shares closed at 84,600 won.

On Friday, Samsung provided guidance, indicating that the operating profit for the April to June quarter is expected to be approximately 10.4 trillion won ($7.54 billion).

This represents a 1,452% increase from the 670 billion won earned a year ago. The anticipated operating profit exceeded the LSEG’s estimate of 8.51 trillion won.

The company also anticipates revenue for the second quarter to range from 73 trillion to 75 trillion won, a significant increase from the 60.01 trillion won reported a year ago.

This is consistent with the 73.7 trillion won estimated by LSEG analysts.

The world’s largest memory chip manufacturer experienced a revival in business last year as memory chip prices rebounded amid AI optimism.

The electronics industry experienced a post-Covid slump in demand for memory chips and electronics, resulting in record losses for the South Korean electronics behemoth in 2023.

Its memory processors are frequently observed in various consumer devices like smartphones and computers.

In April, Samsung stated that it anticipates that the demand for generative AI will be the primary factor driving the second quarter, while mobile demand will remain consistent.

With its Galaxy S24 Ultra smartphone, the South Korean technology behemoth has expanded its use of generative AI.

This device includes AI-powered capabilities for image editing and online item search.

“Samsung reports an earnings surprise, with the majority of the earnings increasing due to the high price of memory.” Thus, Samsung is experiencing an ironic delay in producing HBM (high-bandwidth memory).

On Friday, SK Kim, executive director of Daiwa Capital Markets, stated on CNBC’s “Street Signs Asia” that the supply to Nvidia, which is the qualification, has been postponed.

HBM chips are sophisticated memory chips essential for AI chipsets, which have experienced significant demand due to the AI surge. This has benefited the world’s top two memory chip manufacturers, Samsung Electronics and SK Hynix.

Reuters reported that Samsung had yet to be approved for use in Nvidia’s AI processors in May. Nvidia purportedly considers Samsung to be a potential supplier of HBM chips.

The report was refuted by Samsung, who stated that the experiments with multiple partners for HBM supply are “on track.”

The company’s announcement of an earnings surprise is primarily due to the high price of memory, despite the delay, according to Kim.

“Even though they are delayed in the HBM, the most advanced memory product, they capitalize on their market share and maximize their profits by setting a higher ASP (average selling price).”

Detailed results for the second quarter are anticipated by Samsung later this month.