Samsung Electronics is poised to release its preliminary second-quarter earnings on July 7, which will be a crucial test for the memory chip market's health amidst recent concerns about a slowdown in AI investment. Analysts at Kyobo Securities project Samsung will achieve record quarterly earnings, with sales reaching 176.2 trillion won and an operating profit of 80.3 trillion won. This anticipated success is attributed to rising memory chip prices and a depreciating won, and it would represent an approximate 18-fold increase from the $4.7 trillion won reported a year prior, marking a third consecutive quarter of record operating profit. Other forecasts, compiled by LSEG SmartEstimate, predict an operating profit of $56.35 billion for the April to June quarter.
The market has been unsettled by recent news that Meta is considering a cloud computing venture, potentially signaling a deceleration in AI capital expenditures. This led to a tumble in the Philadelphia Semiconductor Index and a sharp decline in South Korean chip heavyweights like Samsung Electronics and SK Hynix. However, analysts largely view this as short-term market "noise" rather than a fundamental shift, with NH Investment & Securities researcher Na Jeong-hwan commenting that Meta's move aims to maximize its existing AI infrastructure. Daishin Securities researcher Lee Gyeong-min suggests that strong earnings could lead to a rebound, and even if results are slightly disappointing, clarity amidst uncertainty could drive a turnaround.
Despite the positive outlook, some analysts caution that actual earnings could fall short if Samsung books larger-than-expected provisions for employee bonuses, particularly after reaching a wage deal that allocates 10.5% of the semiconductor division's operating profit to special bonuses. Bonus provisions could exceed $40 trillion won, making the timing of their accounting recognition a key variable. JPMorgan noted investor questions regarding the sustainability of AI memory's rapidly rising share of cloud service providers' capital expenditure, which is estimated at 52% this year and expected to exceed 70% next year. Citi Research reported significant quarter-on-quarter increases in average selling prices for DRAM (44%) and NAND (53%) during Q2, driven by strong demand for both high-bandwidth memory (HBM) and conventional memory products.
Looking ahead, analysts identify potential delays in AI infrastructure investment as the primary risk to the current memory boom. However, the overall sentiment remains optimistic, with expectations that the memory market will remain undersupplied at least through the next year. Investors are seeking more concrete evidence that advancements in AI services will translate into faster revenue growth to justify the expanding share of memory in AI infrastructure spending. The upcoming earnings season, starting with Samsung, is expected to help the market reconfirm fundamental strengths and potentially ease concerns about memory chips.
