Samsung: Despite 19x jump in profit, shares slump - Here is why | What lies ahead for AI-driven chip boom?

Samsung Electronics reported a huge jump in second-quarter earnings on Tuesday, led by soaring memory chip prices amid robust artificial intelligence (AI) demand. However, despite the blockbuster results, the company's shares fell 9% to 2,90,750 Korean Won as investors questioned whether the current AI-driven semiconductor boom can be sustained.

The world's largest memory chipmaker estimated its operating profit for the April-June quarter at 89.4 trillion won (approximately $58.4 billion), marking a staggering 19-fold rise from 4.7 trillion won reported in the same period last year. 

Samsung projected its second-quarter revenue to climb 129% year-on-year to 171 trillion won, reflecting strong demand across its semiconductor business.

Samsung's strong performance was supported by another sharp increase in memory chip prices during the quarter as AI-related demand expanded beyond high-bandwidth memory (HBM) chips to include conventional DRAM and NAND memory products.

The company also absorbed substantial employee bonus expenses tied to a wage agreement reached in May, under which semiconductor staff bonuses are linked to operating profit.

Shares fall despite record earnings

Despite the record-breaking performance, Samsung's stock declined as much as 9% in morning trading, while shares of rival SK Hynix fell up to 7.3%, weighing heavily on South Korea's benchmark KOSPI index, which fell around 6%.

Market participants said investors had already priced in exceptionally strong earnings after Samsung's recent rally. Some analysts noted that expectations had risen so high that many investors were hoping operating profit would cross the 90 trillion won mark even after accounting for employee bonus provisions.

Concerns over the long-term outlook for AI infrastructure spending also contributed to the selling pressure.

Some analysts estimated that, excluding these bonus-related costs, Samsung's operating profit could have exceeded 100 trillion won.

Citi Research recently estimated that average selling prices of DRAM rose 44% quarter-on-quarter, while NAND prices increased 53% during the second quarter.

Customers are also increasingly signing long-term supply agreements, reflecting expectations that elevated memory prices could persist for an extended period and benefiting manufacturers with large-scale production capabilities such as Samsung.

Samsung is scheduled to release its detailed second-quarter financial results on July 30, including earnings for each business segment.

AI investment outlook remains the biggest risk

Looking ahead, analysts said the biggest challenge for the semiconductor industry would be any slowdown in AI infrastructure spending.

Potential delays in building AI data centres in the United States due to labour shortages, power supply constraints or local opposition could eventually reduce demand across the AI hardware supply chain.

Despite these concerns, Goldman Sachs recently projected that combined AI-related capital expenditure by the world's four largest hyperscale technology companies—Meta, Microsoft, Amazon and Alphabet-could reach $5.3 trillion between fiscal years 2025 and 2030, indicating continued expansion of AI infrastructure.