Samsung likely to post 18-fold jump in profit on surging AI demand for memory

SEOUL (Reuters) – Samsung Electronics (005930.KS) is likely to estimate that its operating profit jumped about 18-fold ​to another record high from a year earlier in the second quarter, as AI growth continues to strain memory supply and push chip prices ‌higher._x000D_
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On Tuesday, the world’s largest memory chipmaker by sales is likely to flag an operating profit of 86 trillion won ($56.35 billion) for the April to June quarter, according to an LSEG SmartEstimate based on forecasts from 30 analysts, weighted toward those with the best track records._x000D_
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Up from 4.7 trillion won a year earlier, this would mark a third consecutive quarter of record operating profit for ​Samsung, reflecting a prolonged memory shortage, as booming demand for AI inference infrastructure continues to outpace supply growth from global memory manufacturers._x000D_
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Analysts expect the memory ​market to remain undersupplied at least through next year._x000D_
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The robust growth has been driven not only by high-bandwidth memory (HBM), but also by ⁠stronger demand for conventional DRAM and NAND products as AI applications, particularly agentic AI, expand into a broader range of computing workloads._x000D_
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Unlike earlier AI applications focused mainly ​on training large models, agentic AI systems perform more complex, multi-step tasks that require additional memory for server processors and greater storage capacity to retain and retrieve data during ​inference, analysts said._x000D_
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Samsung is a key supplier of memory chips to major technology companies including Nvidia (NVDA.O) Google (GOOGL.O) and Apple (AAPL.O)._x000D_
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Citi Research on Thursday said average selling prices for DRAM and NAND rose 44% and 53% quarter-on-quarter, respectively, in the second quarter._x000D_
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The ongoing memory shortage has fuelled a massive rally in memory chipmakers’ shares, with Samsung Electronics, SK Hynix (000660.KS) and Micron (MU.O) soaring 158%, 273% and 242%, respectively, ​this year, driving all three companies’ market valuations above $1 trillion._x000D_
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CHIP WORKERS’ BONUSES COULD DEFY FORECASTS_x000D_
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Despite the strong operating backdrop, analysts cautioned that the second-quarter earnings could fall short ​of consensus if Samsung books a larger-than-expected provision for employee bonuses during the quarter._x000D_
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In late May, Samsung averted a large-scale strike, reaching a wage deal that allocates 10.5% of the semiconductor division’s ‌operating profit ⁠to special bonuses for chip employees. Some analysts estimate Samsung’s cumulative bonus provisions could exceed 40 trillion won, making the timing of accounting recognition a key variable for second-quarter earnings._x000D_
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Samsung will announce detailed earnings later this month._x000D_
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RISKS TO WATCH_x000D_
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Looking ahead, analysts see potential delays to AI infrastructure investment as the biggest risk to the current memory boom._x000D_
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JPMorgan said in a recent note that while investors broadly agreed memory supply-demand fundamentals remained tight, many questioned whether AI memory’s rapidly rising share of cloud service providers’ capital expenditure — estimated ​at 52% this year and expected to ​exceed 70% next year — would be ⁠sustainable._x000D_
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Any drop in AI spending could come back to haunt Samsung and SK Hynix, which last week pledged to invest 3,200 trillion won ($2.07 trillion) to expand chip capacity in South Korea. Samsung expects to make that investment between 2026 and 2040, while SK Hynix gave ​no detailed timeframe._x000D_
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Investors are seeking clearer evidence that breakthroughs in AI services will translate into faster growth in cloud computing ​and related AI revenues, ⁠helping justify memory’s expanding share of AI infrastructure spending, JPMorgan said._x000D_
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The world’s top memory chipmaker by sales said in April it has signed multi-year binding contracts with customers hoping to lock in supplies, without disclosing identities or terms._x000D_
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Nomura said in a recent report that it expects commodity DRAM prices to rise 24% quarter-on-quarter and NAND prices to increase 25% in the ⁠July-September quarter, ​supported by higher demand for consumer memory products and chips for traditional and AI data centers._x000D_
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Meanwhile, Samsung’s ​mobile business faces mounting cost pressures as rising memory prices have squeezed its margins, with higher component costs more than offsetting recent handset price increases._x000D_
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Although Samsung has already raised smartphone prices, analysts said further price ​increases may be needed in the second half of the year. Rival Apple raised prices of iPads and MacBooks last month.