Published in AI

Samsung Electronics does well thanks to AI

by on08 July 2024

Believes it will get better than expected profit

Shares of Samsung Electronics jumped to their highest level since January 2021 after the South Korean tech giant said it expects better-than-expected profit for the second quarter, thanks to explosive demand for artificial intelligence.

The stock climbed as much as 2.24 per cent, trading at a high of 86,500 Korean won (€57.75), according to LSEG data. Samsung shares closed at 84,600 won on Thursday.

Samsung issued guidance saying operating profit for the April to June quarter is projected to be about 10.4 trillion won (€6.94 billion) — that’s a jump of about 1,452 per cent from 670 billion won a year ago. The expected operating profit beat an LSEG estimate of 8.51 trillion won.

The firm also expects revenue for the second quarter to be between €48.71 billion to €50.05 billion, up from €40.05 billion a year ago. This is in line with the €49.17 billion estimated by LSEG analysts.

Business for the world’s largest memory chip maker rebounded as memory chip prices recovered on AI optimism last year. The South Korean electronics giant saw record losses in 2023 as the industry reeled from a post-Covid slump in demand for memory chips and electronics.

Samsung said in April it expects the second quarter to be driven primarily by demand for generative AI, while mobile demand remains stable.

The South Korean tech giant has invested heavily in generative AI with its Galaxy S24 Ultra smartphone, which features AI-powered photo editing and online item searching.

Samsung announces earnings surprises, but the earnings upside is mainly due to the high memory price. Ironically, Samsung is lagging behind in HBM (high-bandwidth memory) production. This announcement also says that supply to Nvidia as been delayed.

HBM chips are advanced memory chips crucial for AI chipsets – which have seen huge demand thanks to the AI boom. This has primarily benefitted firms such as Samsung Electronics and SK Hynix, the top two memory chipmakers in the world.

Reuters in May reported that Samsung has yet to qualify for use in Nvidia’s AI processors. Nvidia is said to be considering Samsung as a potential supplier of HBM chips. Samsung refuted the report, saying the tests with several partners for HBM supply were “on track.”

Although Samsung is delayed in the HBM—the most advanced memory product—it benefits from its number one capacity and market share, maximising profit with a higher ASP (average selling price). 

Samsung will release detailed results for the second quarter later this month.

Last modified on 08 July 2024
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