The Samsung logo is seen at their booth during the Mobile World Congress in Barcelona, Spain on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)
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Shares of Samsung Electronics jumped to their highest level since January 2021 after the South Korean tech giant said expects better-than-expected second-quarter earnings; thanks to the explosive demand for artificial intelligence.
The stock climbed as much as 2.24 percent on Friday morning, trading at a high of 86,500 Korean won ($62.73), according to LSEG data. Samsung shares closed at 84,600 won on Thursday.
Samsung issued guidance on Friday, saying operating profit for the April-June quarter is forecast to be about 10.4 trillion won ($7.54 billion) — a jump of about 1,452 percent from 670 billion won a year ago. Expected operating profit beat LSEG’s estimate of 8.51 trillion won.
The company also said it expects second-quarter revenue to be between 73 trillion and 75 trillion won, up from 60.01 trillion won a year ago. This is in line with the 73.7 trillion won estimated by LSEG analysts.
Business for the world’s largest memory chip maker rebounded as memory chip prices rebounded last year on optimism about artificial intelligence. The South Korean electronics giant posted record losses in 2023 as the industry was dragged down by a post-Covid slump in demand for memory chips and electronics.
Its memory chips are commonly found in a wide range of consumer devices, including smartphones and computers.
Samsung said in April that it expects the second quarter to be driven mainly by demand for genetic artificial intelligence, while mobile demand remains flat.
The South Korean tech giant has gone a long way in creating artificial intelligence with the Galaxy S24 Ultra smartphone, which has features to edit photos and search for items online using AI.
“Samsung reports earnings surprise, but mainly earnings are up from high memory price. So, ironically, Samsung is lagging in HBM (high bandwidth memory) production. So the supply to Nvidia – the certification – has delay,” SK Kim, executive director of Daiwa Capital Markets, told CNBC’s “Street Signs Asia” on Friday.
HBM chips are advanced memory chips vital to AI chipsets – which are in huge demand thanks to the AI boom. This has greatly benefited companies such as Samsung Electronics and SK Hynix, the world’s two leading memory chip makers.
Reuters reported in May Samsung has not yet qualified for use on Nvidia’s AI processors, as Nvidia is said to be looking at Samsung as a potential HBM chip supplier. Samsung denied the reportsaying trials with several partners to supply HBM are “on track”.
“But despite the delay, the company is reporting that the earnings surprise is due to the high price of memory,” Kim said.
“So even though they are lagging in HBM – the most advanced memory product – they enjoy the advantage of their number one capacity, market share, to maximize profit with a higher ASP (average selling price).”
Samsung is set to announce detailed second-quarter results later this month.
– CNBC’s Lim Hui Jie contributed to this report.
