Samsung forecasts 19x profit surge on AI chip demand

Samsung projects record quarterly earnings

Samsung Electronics has forecast operating profit of 89 trillion won ($58 billion) for the second quarter of 2024, representing a 19-fold increase compared to the same period last year. The South Korean technology manufacturer attributes the surge to sustained global demand for AI memory chips, according to preliminary earnings guidance released Tuesday.

The company projects revenue of approximately 171 trillion won for the April-June period, more than double its year-ago sales. These figures mark Samsung's third consecutive record quarterly performance, with full detailed results scheduled for release later in July.

Supply constraints drive semiconductor pricing

The exceptional results stem from an ongoing imbalance between semiconductor supply and demand that has enabled Samsung to raise memory chip prices. The company manufactures chips for major technology firms including Nvidia and Google, in addition to producing components for its own consumer electronics portfolio.

Marc Einstein, an industry analyst at Counterpoint Research, characterized the projected earnings as "one of the best quarterly performances ever" in the technology sector, approaching the record Nvidia established 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 noted.

Why it matters

Samsung's performance signals the semiconductor industry's central role in the AI infrastructure buildout. The company's ability to command premium pricing while competitors like SK Hynix see similar stock gains—up over 200% this year—demonstrates how memory chip manufacturers have become critical bottlenecks in AI deployment. This pricing power may persist until new fabrication capacity comes online from planned investments across Asia.

Market response and regional competition

Despite the strong earnings forecast, Samsung's shares declined approximately 4% in Seoul trading Tuesday morning. The stock has nonetheless more than doubled in value since January. Competitor SK Hynix has seen even steeper gains, with shares jumping over 200% in the same timeframe.

The semiconductor boom has lifted South Korea's benchmark Kospi index by more than 80% this year. In June, the South Korean government announced plans for at least $880 billion in investments led by Samsung and SK Hynix to expand domestic chip manufacturing capacity over the coming years.

Competing Asian economies are pursuing similar strategies. Japan, China, and Taiwan are all directing substantial capital toward new chip fabrication facilities to capture market share in the expanding semiconductor sector.

These details were first reported by BBC News.