Samsung Electronics is expected to announce a preliminary operating profit of $55.1 billion (84.3 trillion won) for the second quarter, an 18-fold increase from a year ago and surpassing its profit for the entirety of 2025. Revenue is forecast to reach a record $110.1 billion (169 trillion won), representing a 127% surge. This robust performance is attributed to the soaring demand for high-performance memory chips essential for training and running large AI systems, which has created a global supply crunch and driven up prices.
Average DRAM selling prices increased over 40% in the April-June quarter compared to the previous three months, while NAND prices jumped more than 50%, according to HSBC Holdings Plc. Analysts remain optimistic about Samsung's stock, with an average price target implying a 52% upside over the next 12 months. Citigroup Inc. recently raised its target to $345.50 (530,000 won) from $300.20 (460,000 won), which is 71% higher than the previous week's close. Despite some recent market volatility in chip stocks, analysts believe memory fundamentals are intact, with server DRAM pricing outperforming due to strong CPU demand.
The strong results from Samsung are seen as crucial for validating the AI trade amidst recent investor concerns about potential overcapacity and the payoff from large AI investments, which caused a nearly 9% stock dip for Samsung in five sessions last week. The company's stock has doubled this quarter and is up over 155% this year. Valuations remain attractive, with Samsung trading at 5.7 times its 12-month forward earnings, near its cheapest level since 2007, compared to Micron at 7 and the broader Philadelphia Semiconductor Index at nearly 24.
The booming demand for AI applications, especially agentic AI systems that perform complex, multi-step tasks, is driving increased need for both high-bandwidth memory (HBM) and conventional DRAM and NAND products. This has led to average selling prices for DRAM and NAND rising by 44% and 53% quarter-on-quarter, respectively, in the second quarter. The memory market is expected to remain undersupplied through at least next year, with commodity DRAM prices projected to rise 24% and NAND prices 25% in the July-September quarter.
However, potential delays in AI infrastructure investment pose the biggest risk to the ongoing memory boom. Investors are seeking clearer evidence that AI service breakthroughs will translate into faster growth in cloud computing and related AI revenues to justify the expanding share of AI memory in cloud service providers' capital expenditure, estimated at 52% currently and expected to exceed 70% next year.
