Nandini Roy Choudhury, writer
News in brief
Samsung Electronics has reported a better-than-anticipated profit for the second quarter, driven by the growing demand for AI. The company’s running profit for the April to June quarter is expected to be around 10.4 trillion won ($7.54 billion), a significant increase from the 670 billion won it made last year. The projected operating profit is higher than the 8.51 trillion won predicted by LSEG. Samsung’s memory chip maker saw a rise in sales due to increased memory chip prices due to confidence in AI last year. The company’s Galaxy S24 Ultra smartphone has been a key driver of creative AI demand. However, Samsung is behind schedule on high-bandwidth memory (HBM) production, which is crucial for AI chipsets. Despite the delay, Samsung believes the earning surprise is due to the high price of memory. The company will share full data for the second quarter later this month.
News in details
Samsung Electronics stock hit its best level since January 2021 after the South Korean tech giant said it expects a better-than-expected profit for the second quarter. This is because demand for AI is growing so quickly.
As of Friday morning, the stock had gone up as much as 2.24%, selling at a high of 86,500 Korean won ($62.73). Thursday, Samsung stock ended the day at 84,600 won.
Friday, Samsung gave an update on its plans. It said that its running profit for the April to June quarter would be about 10.4 trillion won ($7.54 billion), which is a huge increase from the 670 billion won it made the same time last year. The projected operating profit was more than the 8.51 trillion won that LSEG thought it would be.
A year ago, the company made 60.01 trillion won in sales in the second quarter. This year, they expect to make 73 to 75 trillion won. This is the same as what LSEG experts thought, which was 73.7 trillion won.
The biggest memory chip maker in the world saw a rise in sales as memory chip prices went up due to confidence about AI last year. The South Korean electronics giant lost a lot of money in 2023 because demand for memory chips and gadgets dropped after Covid.
Memory chips made by this company are used in many consumer electronics, such as computers and smartphones.
In April, Samsung said that demand for creative AI would be the main driver in the second quarter, while demand for mobile devices would stay the same.
With its Galaxy S24 Ultra smartphone, the South Korean tech giant has put a lot of effort into generative AI. The phone can edit photos and look for things online using AI.
“Samsung reports earnings that were better than expected, but most of the change is due to the high price of memory.” In a strange way, Samsung is behind schedule on making HBM (high-bandwidth memory). So the qualification for supply to Nvidia has been pushed back, said SK Kim, executive head of Daiwa Capital Markets, on Friday on CNBC’s “Street Signs Asia.”
Because AI is so popular right now, HBM chips are very important for AI chipsets, which are in high demand. This has mostly helped companies like Samsung Electronics and SK Hynix, which make the two most popular memory chips in the world.
In May, Reuters said that Samsung has not yet met the requirements to be used in Nvidia’s AI computers. This is because Nvidia is said to be looking at Samsung as a possible supplier of HBM chips. The story was false, and Samsung said that tests with several partners for HBM supply are “on track.”
“But despite the delay, the company says the earning surprise is due to the high price of memory,” Kim said.
“So even though they are behind on the most advanced memory product, HBM, they benefit from having the largest market share in terms of capacity, so they can charge more and still make the most money.”
Later this month, Samsung will share full data for the second quarter.
Source : CNBC News
