Samsung’s Profit Plunge Highlights Challenges in AI Chip Market

🗝️ Key Points

• Samsung Electronics anticipates a 39% drop in its second-quarter operating profit, primarily due to delays in supplying advanced memory chips to AI chip leader NVIDIA (NVDA).
• Rivals SK Hynix and Micron Technology (MU) have benefited from strong demand for AI memory chips, while Samsung's growth is hindered by its dependency on the Chinese market,.
• sales restrictions on advanced chips are stringent.Analysts indicate that Samsung's progress in obtaining NVIDIA's certification for its latest HBM chips has been slow.

Samsung Electronics anticipates a 39% drop in its second-quarter operating profit, primarily due to delays in supplying advanced memory chips to AI chip leader NVIDIA (NVDA). According to LSEG SmartEstimate data, the world’s largest memory chip manufacturer expects an operating profit of 6.3 trillion won (approximately $4.62 billion) from April to June, marking the lowest profit level in six quarters.

The South Korean tech giant’s ongoing weak financial performance has heightened investor concerns about its ability to compete in the high-bandwidth memory (HBM) chip sector, crucial for AI data centers. Rivals SK Hynix and Micron Technology (MU) have benefited from strong demand for AI memory chips, while Samsung’s growth is hindered by its dependency on the Chinese market, where U.S. sales restrictions on advanced chips are stringent.

Analysts indicate that Samsung’s progress in obtaining NVIDIA’s certification for its latest HBM chips has been slow. NH Investment & Securities senior analyst Ryu Young-ho noted that Samsung’s HBM Revenue might remain flat in the second quarter due to ongoing sales restrictions and delayed supply of HBM3E chips to NVIDIA. Although Samsung began supplying these chips to AMD in June, its shipments to NVIDIA are not expected to be significant this year.

Samsung’s stock has risen about 19% this year, underperforming the broader Korean stock index, which gained 27.3%, making it the worst-performing major memory chip manufacturer in terms of stock price growth this year.

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