The Samsung logo is displayed in their pavilion 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 hit their highest level since January 2021 after the South Korean tech giant said it expected better-than-expected second-quarter profit, helped by explosive demand for artificial intelligence.
Samsung shares rose 2.24 percent 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 on Friday issued its operating profit forecast for the April-June quarter, which is expected to come in at around 10.4 trillion won ($7.54 billion), up about 1,452 percent from 670 billion won a year earlier. The expected operating profit exceeds LSEG’s estimate of 8.51 trillion won.
The company also said it expects second-quarter revenue to be in the range of 73 trillion won to 75 trillion won, up from 60.1 trillion won a year ago. That figure is in line with the 73.7 trillion won estimate by LSEG analysts.
Business at the world’s largest memory chipmaker rebounded last year as memory chip prices rebounded on optimism around AI. The South Korean electronics giant posted record losses in 2023 as the industry reeled from a drop in demand for memory chips and electronics after the Covid-19 pandemic.
Its memory chips are commonly used 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 generative AI, while mobile demand remains flat.
The South Korean tech giant has bet on generative AI with its Galaxy S24 Ultra smartphone, which comes with features for editing photos and searching for items online using AI.
“Samsung reports surprising results, but the earnings increase is mainly due to high memory prices. Ironically, Samsung is lagging in high-speed memory (HBM) 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 essential for AI chipsets, which have seen strong demand thanks to the rise of AI. This has greatly benefited companies such as Samsung Electronics and SK Hynix, the world’s two largest memory chipmakers.
In May, Reuters reported that Samsung had not yet obtained the necessary qualifications to be used in Nvidia’s AI processors, as Nvidia reportedly considered Samsung as a potential supplier of HBM chips. Samsung refuted the report, saying that tests with several partners for HBM supply were “well underway.”
“But despite the delay, the company is reporting that the earnings surprise is due to high memory prices,” Kim said.
“Although they are behind in HBM (most advanced memory product), they benefit from their leading capacity and market share, which allows them to maximize their profits through a higher average selling price (ASP).”
Samsung is expected to release its detailed second-quarter results later this month.
–CNBC’s Lim Hui Jie contributed to this report.
