Samsung Electronics Co SSNLF is anticipated to experience a remarkable upsurge in first-quarter operating profit, despite the drag from HBM on its stock performance.
The Rise in Operating Profit: The South Korean technology behemoth is poised to achieve an operating profit of 6.6 trillion won ($4.9 billion) in the first quarter, a tenfold increase from the same period last year. This positive trajectory signals a recovery in the memory semiconductor market, which has been mired in a slump for the past two years, as reported by Reuters.
Analyst Kim Roko from Hana Securities highlighted that Samsung’s stock lag is attributed to HBM, notwithstanding the company’s dedicated efforts in this realm. Roko remarked, “Samsung is toiling diligently on HBM, albeit progress remains opaque…in comparison to rivals, Samsung stock is trailing due to HBM.” He added, “While the recent launch of the 8-layer HBM3E may not substantially impact market share, the forthcoming 12-layer version, slated for year-end, remains unclaimed. Samsung might make headway with more sophisticated offerings.”
With a resurgence in global consumer demand for electronics, tech firms are now fortifying their chip inventories. Bernstein analysts noted a more than 20% upturn in the average selling price for DRAM chips in the three months leading to March.
A significant portion of Samsung’s operating profit is derived from semiconductors, with forecasts pointing to over a twofold increase in earnings for the company this year, according to LSEG analysts. The burgeoning demand from AI clientele such as Nvidia is propelling the need for specialized and bespoke storage chips, potentially stabilizing the historically turbulent market.
JPMorgan analysts envision that Samsung’s HBM revenue could soar to $13 billion by 2025, constituting 13% of its overall semiconductor sales. This anticipated revenue stream could serve as a buffer against market fluctuations in the long run.
Significance of Recent Developments: Earlier this year, Samsung unveiled a novel memory chipset aimed at revolutionizing the AI sector. Nvidia’s expressed interest in Samsung’s upcoming high-bandwidth memory (HBM) chips in March triggered a substantial uptick in Samsung’s stock. Nvidia’s Chief Executive, Jensen Huang, foresaw the current “AI computing ramp” as merely the prelude to an extended era, establishing the potential for AI to reshape the memory chip landscape.
The interconnectedness between AI and memory chip technology is unveiling new vistas for industry players, setting the stage for dynamic growth and adaptation in the semiconductor landscape.
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