Samsung’s logo is displayed in its pavilion at Mobile World Congress in Barcelona, Spain on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)
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Shares in South Korean tech giant Samsung Electronics soared to the company’s highest level since January 2021. The company expects second-quarter profits to beat expectations. This is thanks to the exploding demand for artificial intelligence.
Samsung shares rose 2.24 percent to trade at a peak of 86,500 won ($62.73) on Friday morning, according to LSEG data, after closing at 84,600 won on Thursday.
Samsung said in its guidance on Friday it expects operating profit of about 10.4 trillion won ($7.54 billion) in the April-June quarter, up about 1,452 percent from 670 billion won in the same period last year. The expected operating profit beat LSEG’s forecast of 8.51 trillion won.
The company also said it expects second-quarter sales to be between 73 trillion and 75 trillion won, down from 60.1 trillion won a year earlier, in line with the 73.7 trillion won forecast by LSEG analysts.
The world’s largest memory chip maker’s performance rebounded as memory chip prices rebounded on optimism about AI last year.The South Korean electronics giant posted its biggest ever loss for 2023 as the industry was hit by sluggish demand for memory chips and electronic devices post-COVID-19.
The company’s memory chips are widely used in a wide range of consumer devices, including smartphones and computers.
Samsung said in April that it expects mobile demand to remain stable in the second quarter, but that it expects it to be primarily driven by demand for generative AI.
The South Korean tech giant is putting a big emphasis on generative AI with its Galaxy S24 Ultra smartphone, which comes with AI-based photo editing features and the ability to search for items online.
“Samsung reported unexpected profits, but the upside to its profits was mainly due to higher memory prices. Ironically, Samsung has been lagging in HBM (high-bandwidth memory) production, which is delaying its supplies to NVIDIA, i.e. qualification,” SK Kim, executive director at Daiwa Capital Markets, said on CNBC’s “Street Signs Asia” on Friday.
HBM chips are advanced memory chips essential for AI chipsets, and demand is surging thanks to the AI boom, which is hugely benefiting companies such as Samsung Electronics and SK Hynix, the world’s top two memory chip makers.
Reuters reported in May: Samsung is not yet qualified to use it Nvidia’s AI processors are said to be looking at Samsung as a potential supplier of HBM chips. Samsung denied the reports.He said testing with multiple supply partners was “progressing well.”
“But despite the delays, the company reported unexpected profits due to rising memory prices,” Kim said.
“So, even though they are lagging behind in the most advanced memory product, HBM, they enjoy the benefits of being number one in capacity and market share, maximizing their profits with a higher ASP (average selling price).”
Samsung is due to release detailed second-quarter results later this month.
–CNBC’s Lim Hui Jie contributed to this report.
