AI boom to drive Samsung's Q2 profit up nearly 18x
What's the story
Samsung Electronics, the world's largest memory chipmaker by sales, is likely to see its operating profit jump nearly 18-fold in the second quarter. The increase comes as artificial intelligence (AI) growth continues to strain memory supply and push chip prices higher. An LSEG SmartEstimate based on forecasts from 30 analysts suggests an operating profit of around 86 trillion won ($56.35 billion) for the April to June period.
Profit increase
Year-on-year increase in operating profit
The projected profit for Q2 is a massive jump from the 4.7 trillion won recorded in the same period last year. This would be Samsung's third consecutive quarter of record operating profit, largely due to a prolonged memory shortage. The demand for AI inference infrastructure has continued to outpace supply growth from global memory manufacturers, with analysts expecting the memory market to remain undersupplied at least through next year.
Market demand
Expanded AI applications driving demand for conventional DRAM, NAND products
The surge in profit is not only due to high-bandwidth memory (HBM) but also a rise in demand for conventional DRAM and NAND products. This is because AI applications, especially agentic AI, are expanding into more computing workloads. Unlike earlier models that focused on training large models, these systems perform complex multi-step tasks requiring additional memory for server processors and greater storage capacity to retain/retrieve data during inference.
Tech supplier
Memory chipmakers' stocks have surged this year
Samsung is a major supplier of memory chips to leading technology companies such as NVIDIA, Google, and Apple. According to Citi Research, average selling prices for DRAM and NAND rose by 44% and 53% quarter-on-quarter, respectively, in Q2. The ongoing memory shortage has led to a massive rally in shares of memory chipmakers, with Samsung Electronics, SK Hynix, and Micron gaining 158%, 273%, and 242%, respectively, this year.
Earnings caution
Potential risks to Samsung's Q2 earnings
Despite the strong operating backdrop, analysts have warned that Samsung's second-quarter earnings could fall short of consensus if it books a larger-than-expected provision for employee bonuses during this period. In late May, Samsung reached 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 accounting recognition timing crucial for Q2 earnings.
Investment risks
Delays in AI infrastructure investment could impact memory boom
Looking ahead, analysts see potential delays in AI infrastructure investment as the biggest risk to the current memory boom. JPMorgan recently noted that while investors broadly agreed on tight memory supply-demand fundamentals, many questioned whether AI memory's rapidly rising share of cloud service providers' capital expenditure would be sustainable. Any drop in AI spending could affect Samsung and SK Hynix, which last week pledged a massive $2.07 trillion investment to expand chip capacity in South Korea.