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Samsung Electronics reported a blockbuster second-quarter performance on Tuesday, with operating profit surging nearly 19-fold year-on-year, driven by the artificial intelligence (AI)-led memory chip boom. However, despite beating market expectations, the company’s shares fell sharply as investors worried that the rapid growth in AI infrastructure spending may begin to slow.
The South Korean technology giant estimated its April-June operating profit at 89.4 trillion won (around $58.4 billion), significantly higher than 4.7 trillion won reported in the same period last year. The earnings also surpassed analysts’ expectations of 87.3 trillion won, according to LSEG SmartEstimate.
Revenue for the quarter is expected to rise 129 per cent year-on-year to 171 trillion won, reflecting robust demand for memory chips used in AI servers and data centres.
AI boom powers earnings
Samsung has emerged as one of the biggest beneficiaries of the global AI investment cycle, with soaring demand for memory chips pushing prices of DRAM and NAND flash storage to record levels.
According to Citi Research, average selling prices of DRAM and NAND chips increased 44 per cent and 53 per cent, respectively, during the quarter as AI-related demand expanded beyond high-bandwidth memory (HBM) into conventional memory products.
Analysts said Samsung’s earnings remained exceptionally strong despite the company setting aside substantial provisions for employee bonuses following a wage agreement signed in May. Excluding these bonus provisions, operating profit could have crossed 100 trillion won, they estimated.
Shares slump despite record profit
Despite the earnings beat, Samsung’s shares fell as much as 10 per cent during trading before closing 6.9 per cent lower, erasing more than $80 billion in market value. Rival SK Hynix also declined about 6 per cent, dragging South Korea’s benchmark KOSPI index lower.
Market participants said the strong earnings had already been priced into Samsung’s stock after a sharp rally earlier this year. The bigger concern, they noted, is whether the AI spending boom can be sustained.
Investors are increasingly questioning whether major U.S. technology companies—including Meta, Microsoft, Amazon and Alphabet—will continue investing aggressively in AI infrastructure given the enormous capital expenditure required and uncertain long-term returns.
Memory market may moderate
While AI demand continues to support the memory industry, analysts cautioned that price growth could begin to moderate in the coming quarters.
Morningstar said Samsung’s revenue guidance fell slightly short of lofty market expectations, suggesting DRAM price increases may not have been as strong as investors anticipated.
Morgan Stanley also warned that semiconductor stocks could remain under pressure as hyperscale technology companies adopt greater capital expenditure discipline after an unprecedented investment cycle.
Samsung is expected to continue benefiting from strong demand in its memory chip business in the near term. However, analysts believe losses in its foundry and logic chip businesses could widen due to higher employee-related costs.
The company is scheduled to announce its detailed second-quarter earnings, including segment-wise performance, on July 30.
The key focus for investors now will be whether AI infrastructure spending by global technology giants remains strong enough to sustain the record profitability enjoyed by memory chip makers over the past year.
