Samsung profit soars 18-fold as AI demand for memory chips strains global supply

Samsung likely to post 18-fold jump in profit on surging AI demand for memory

SEOUL, July 6 (Reuters) - Samsung Electronics (005930.KS), opens new tab is likely to estimate that its operating profit jumped about 18-fold to another record high from a year earlier in the second quarter, as AI growth continues to strain memory supply and push chip prices higher. On Tuesday, the world's largest memory chipmaker by sales is likely to flag an operating profit of 86 trillion won ($56.35 billion) for the April to June quarter, according to an LSEG SmartEstimate based on forecasts from 30 analysts, weighted toward those with the best track records. Up from 4.7 trillion won a year earlier, this would mark a third consecutive quarter of record operating profit for Samsung, reflecting a prolonged memory shortage, as booming demand for AI inference infrastructure continues to outpace supply growth from global memory manufacturers. Analysts expect the memory market to remain undersupplied at least through next year. The robust growth has been driven not only by high-bandwidth memory (HBM), but also by ⁠stronger demand for conventional DRAM and NAND products as AI applications, particularly agentic AI, expand into a broader range of computing workloads. Unlike earlier AI applications focused mainly on training large models, agentic AI systems perform more complex, multi-step tasks that require additional memory for server processors and greater storage capacity to retain and retrieve data during inference, analysts said. Samsung is a key supplier of memory chips to major technology companies including Nvidia (NVDA.O), opens new tab, Google (GOOGL.O), opens new tab and Apple (AAPL.O), opens new tab. Citi Research on Thursday said average selling prices for DRAM and NAND rose 44% and 53% quarter-on-quarter, respectively, in the second quarter. The ongoing memory shortage has fuelled a massive rally in memory chipmakers' shares, with Samsung Electronics, SK Hynix (000660.KS), opens new tab and Micron (MU.O), opens new tab soaring 158%, 273% and 242%, respectively, this year, driving all three companies' market valuations above $1 trillion. CHIP WORKERS' BONUSES COULD DEFY FORECASTS Despite the strong operating backdrop, analysts cautioned that the second-quarter earnings could fall short of consensus if Samsung books a larger-than-expected provision for employee bonuses during the quarter. In late May, Samsung averted a large-scale strike, reaching a wage deal that allocates 10.5% of the semiconductor division's operating profit ⁠to special bonuses for chip employees. Some analysts estimate Samsung's cumulative bonus provisions could exceed 40 trillion won, making the timing of accounting recognition a key variable for second-quarter earnings. Samsung will announce detailed earnings later this month. RISKS TO WATCH Looking ahead, analysts see potential delays to AI infrastructure investment as the biggest risk to the current memory boom. JPMorgan said in a recent note that while investors broadly agreed memory supply-demand fundamentals remained tight, many questioned whether AI memory's rapidly rising share of cloud service providers' capital expenditure -- estimated at 52% this year and expected to exceed 70% next year -- would be ⁠sustainable. Any drop in AI spending could come back to haunt Samsung and SK Hynix, which last week pledged to invest 3,200 trillion won ($2.07 trillion) to expand chip capacity in South Korea. Samsung expects to make that investment between 2026 and 2040, while SK Hynix gave no detailed timeframe. Investors are seeking clearer evidence that breakthroughs in AI services will translate into faster growth in cloud computing and related AI revenues, ⁠helping justify memory's expanding share of AI infrastructure spending, JPMorgan said. The world's top memory chipmaker by sales said in April it has signed multi-year binding contracts with customers hoping to lock in supplies, without disclosing identities or terms. Nomura said in a recent report that it expects commodity DRAM prices to rise 24% quarter-on-quarter and NAND prices to increase 25% in the ⁠July-September quarter, supported by higher demand for consumer memory products and chips for traditional and AI data centers. Meanwhile, Samsung's mobile business faces mounting cost pressures as rising memory prices have squeezed its margins, with higher component costs more than offsetting recent handset price increases. Although Samsung has already raised smartphone prices, analysts said further price increases may be needed in the second half of the year. Rival Apple raised prices of iPads and MacBooks last month. ($1 = 1,526.2500 won) Reporting by Heekyong Yang; Editing by Sonali Paul Our Standards: The Thomson Reuters Trust Principles., opens new tab

Samsung Eyes Another Record Quarter on Explosive AI Memory Demand, But Rising Employee Bonuses Could Clou

AI Memory Boom Expected to Drive Another Record Quarter Samsung is expected to report an operating profit of about 86 trillion won ($56.35 billion) for the April-to-June quarter, according to an LSEG SmartEstimate based on forecasts from 30 analysts, Reuters reported on Sunday. That would represent an almost 18-fold increase from 4.7 trillion won a year earlier and mark the company's third consecutive quarter of record operating profit. The expected earnings surge reflects a prolonged shortage in the global memory market, with demand for AI infrastructure continuing to outpace supply. Analysts believe the market will remain undersupplied through at least next year. AI Demand Lifts DRAM And NAND Prices The AI boom is boosting demand not only for high-bandwidth memory used in AI accelerators but also for conventional DRAM and NAND chips as more advanced AI applications require greater memory and storage capacity. According to Citi Research, average selling prices for DRAM and NAND climbed 44% and 53%, respectively, during the second quarter. The rally has fueled gains across the memory industry, with Samsung, SK Hynix and Micron Technologies, Inc. (NASDAQ:MU) all seeing their market valuations surpass $1 trillion this year. Employee Bonuses Could Weigh On Samsung Earnings Despite the strong operating environment, analysts caution that Samsung's reported earnings could fall short of expectations if it books a larger-than-expected provision for employee bonuses. The company reached a wage agreement in May that allocates 10.5% of the semiconductor division's operating profit to special bonuses. Some analysts estimate cumulative bonus provisions could exceed 40 trillion won, making the timing of those accounting charges an important factor in quarterly results. AI Spending Outlook Remains A Key Risk Looking ahead, analysts say the biggest threat to Samsung's momentum is any slowdown in AI infrastructure spending. JPMorgan noted investors remain confident about tight memory supply-demand fundamentals but are increasingly questioning whether AI memory's growing share of cloud providers' capital expenditures can be sustained over the long term. Samsung is scheduled to release its detailed second-quarter earnings later this month. Price Action: At the time of writing, Samsung shares were trading at 307,000 South Korean won (about $00), down 0.81% on the day in Seoul, according to Benzinga Pro. According to Benzinga Edge Stock Rankings, Samsung shares show a positive price trend across the short, medium and long-term time frames. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo Courtesy: Kittyfly on Shutterstock.com Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.