Samsung Electronics is expected to announce a preliminary operating profit of 84.3 trillion won ($55.1 billion) for the quarter ending in June, an 18-fold jump from the previous year, which would surpass its entire profit for 2025. Revenue is also projected to increase by 127% to a record 169 trillion won. This surge is attributed to the booming demand for high-performance memory chips required by AI systems like Anthropic's Claude and OpenAI's ChatGPT, leading to a global supply crunch. Average DRAM selling prices rose over 40% and NAND prices over 50% in the April-June quarter, according to HSBC Holdings Plc.
Despite recent market turbulence and concerns about AI computing capacity sparked by Meta, analysts remain bullish on Samsung's stock. Citigroup Inc. recently raised its price target to 530,000 won from 460,000 won, implying a 71% upside from Friday's close. Analysts like Peter Lee from Citigroup believe that memory fundamentals are intact, with server DRAM pricing outperforming due to strong CPU demand. Moreover, Samsung's stock trades at an attractive valuation of 5.7 times its 12-month forward earnings, significantly lower than Micron's 7 and the Philadelphia Semiconductor Index's nearly 24.
The preliminary earnings report, expected on Tuesday, is seen as a crucial catalyst for global chip stocks, offering insights into high-bandwidth memory demand and pricing. The company's strong performance reflects a prolonged memory shortage, as demand for AI inference infrastructure continues to outpace supply. Samsung and SK Group are planning substantial investments of 800 trillion won to build two chipmaking plants each to rapidly expand capacity. Additionally, Anthropic is reportedly in discussions with Samsung regarding a partnership for custom AI chip manufacturing.
However, the lofty earnings expectations leave little room for error. While global semiconductor shares had a record-breaking quarter, the rally faced headwinds in June due to concerns over competition, potential overcapacity, and the returns on massive AI investments. Some analysts caution that a flattening or deceleration in memory price hikes could signal downside risks. There could also be variability in second-quarter earnings due to potential bonus provisions for employees, with some estimates suggesting these could exceed 40 trillion won.
