Samsung Electronics shares rose to their highest since January 2021 after the South Korean technology giant said it expects better-than-expected profits for the second quarter, because of the explosive demand for artificial intelligence.
The stock rose as much as 2.24 percent on Friday morning, trading at a high of 86,500 Korean won ($62.73), in response to LSEG data. On Thursday, Samsung shares closed at 84,600 won.
Samsung issued a forecast on Friday that operating profit for the April-June quarter can be about 10.4 trillion won ($7.54 billion), up about 1,452% from 670 billion won a 12 months earlier. The expected operating profit exceeded LSEG's estimate of 8.51 trillion won.
The company also expects second-quarter revenue of 73 trillion won to 75 trillion won, in comparison with 60.01 trillion won a 12 months earlier, in step with LSEG analysts' estimate of 73.7 trillion won.
The world's largest memory chip maker's business rebounded as memory chip prices recovered last 12 months on AI optimism. The South Korean electronics giant posted record losses in 2023 because the industry suffered a post-Covid slump in demand for memory chips and electronics.
Its memory chips may be present in quite a few consumer devices, including smartphones and computers.
Samsung announced in April that the corporate expects the second quarter to be driven primarily by demand for generative AI, while mobile demand will remain stable.
The South Korean tech giant has placed great emphasis on generative AI with its Galaxy S24 Ultra smartphone, offering features for editing photos and looking for items online using AI.
“Samsung announces surprise earnings, but the profit increase is mainly due to high memory prices. Ironically, Samsung is lagging behind in HBM (high-bandwidth memory) production, so Nvidia's supply – the qualification – has been delayed,” SK Kim, executive director of Daiwa Capital Markets, told CNBC's “Street Signs Asia” on Friday.
HBM chips are advanced memory chips which are essential for AI chipsets – and which have seen enormous demand because of the AI boom. This has particularly benefited firms resembling Samsung Electronics and SK Hynix, the 2 largest memory chip manufacturers on this planet.
Reuters reported in May that Samsung still has to qualify to be used in Nvidia's AI processors, as Nvidia is reportedly considering Samsung as a possible supplier for HBM chips. Samsung refuted the reportand stated that testing with multiple partners to provide HBM was “on schedule.”
“But despite the delay, the company's surprise earnings forecast is due to high memory prices,” Kim said.
“Although they are behind in HBM – the most advanced memory product – they benefit from their number one capacity and market share and can maximize their profit with a higher ASP (average selling price).”
Samsung will release detailed second-quarter results later this month.
image credit : www.cnbc.com