Daijiworld Media Network – Seoul
Seoul, Jul 7: Samsung Electronics on Tuesday reported a 19-fold surge in its second-quarter operating profit, driven by robust demand for artificial intelligence (AI)-related memory chips, but its shares tumbled nearly 7 per cent as investors expressed concerns over the sustainability of the AI boom.
The South Korean technology giant estimated its operating profit for the April-June quarter at 89.4 trillion won ($58.44 billion), sharply higher than 4.7 trillion won recorded during the same period last year. The figure also exceeded an LSEG SmartEstimate of 87.3 trillion won.
Samsung said its revenue is expected to rise 129 per cent year-on-year to 171 trillion won, reflecting strong demand for memory chips used in AI data centres.
Despite the record earnings, Samsung shares fell as much as 10.1 per cent during trading before closing down 6.9 per cent. Rival SK Hynix also declined 6 per cent, dragging South Korea's benchmark KOSPI index down 4.9 per cent.
Analysts attributed the sell-off to investor concerns that spending on AI infrastructure by major US technology companies could slow, affecting future demand for memory chips.
Albert Yong, managing partner at Petra Capital Management, said Samsung's strong earnings had largely been priced into the stock after its recent rally.
"Investors remain concerned about the sustainability of the AI boom and the risk of slower AI infrastructure spending by major US technology firms," he said.
Memory chip prices continued to rise during the quarter as AI-driven demand expanded beyond high-bandwidth memory (HBM) chips to conventional DRAM and NAND products. According to Citi Research, average selling prices for DRAM and NAND increased by 44 per cent and 53 per cent, respectively, compared to the previous quarter.
However, Morningstar analyst Jing Jie Yu said Samsung's revenue estimate was slightly below market expectations, suggesting that DRAM price increases had been more moderate than anticipated.
Samsung's earnings growth came despite setting aside significant provisions for employee bonuses under a wage agreement reached in May. Analysts said operating profit could have exceeded 100 trillion won without those bonus-related expenses.
The rapid expansion of HBM production has also tightened supplies of conventional memory chips used in smartphones, personal computers and enterprise servers, supporting higher prices across the memory market.
While analysts expect Samsung's memory business to remain strong in the near term, they warned that losses in its foundry and logic chip divisions are likely to widen as bonus expenses are spread across the semiconductor business.
Samsung is scheduled to announce its detailed second-quarter financial results, including divisional earnings, on Jul 30.
Looking ahead, analysts identified slowing AI infrastructure investment as the biggest risk to the memory chip boom. Investors are increasingly concerned that major technology companies, including Meta, Microsoft, Amazon and Alphabet, may adopt tighter capital expenditure plans after committing massive investments to AI infrastructure.
Morgan Stanley said in a recent report that the recent weakness in semiconductor stocks could continue as investors brace for greater capital spending discipline among hyperscale technology companies.
Samsung Electronics and SK Hynix recently unveiled investment plans worth hundreds of billions of dollars to expand AI-related chip production. However, analysts cautioned that such large-scale capacity expansion could become a challenge if AI-related demand moderates in the coming years.
Meanwhile, SK Hynix has launched a 43 trillion won share sale in the United States, with trading expected to begin later this week, providing another test of investor confidence in the semiconductor sector.