Samsung Electronics' quarterly profit hit a new high in more than three years, surging demand for AI memory chips pushes stock prices to reach historic highs

The Zhitong Finance App learned that Samsung Electronics Co. (Samsung Electronics Co.) announced the highest quarterly profit in more than three years. This performance was mainly due to a surge in demand for memory chips in the artificial intelligence (AI) related field; due to this favorable influence, the company's stock price hit a record high. According to preliminary financial reports released by Samsung, South Korea's largest company achieved operating profit of about 12.1 trillion won (8.5 billion US dollars) in the third fiscal quarter, exceeding analysts' previous expectations of 9.70 trillion won; revenue increased by about 9% year-on-year to 86 trillion won.

On Tuesday morning, Samsung Electronics' stock price continued to rise in the Seoul stock market, with a maximum increase of 3.1%. The company will release a full financial report on October 30, disclosing net profit and performance details of each division.

This performance may boost investors' confidence — whether it's investors betting on continued demand for AI servers and memory chips, or investors who are optimistic about Samsung's “recovering lost ground” (Samsung has suffered repeated setbacks in the memory chip field in recent years, and has been taken over part of the market share by smaller competitor SK Hynix Inc.).

Sanjeev Rana (Sanjeev Rana), head of Korean research at Lyon Securities (CLSA), said: “Samsung's operating profit far exceeded everyone's expectations. Its high-bandwidth memory (HBM) shipments have recovered, up 70% to 80% from the previous quarter; in addition, the asset write-down of the wafer foundry business is likely to fall far short of expectations.”

Samsung is trying to seize the anticipated AI boom in the next few years. The company has made progress in developing the latest generation of HBM chips, has received an order from AMD (AMD.US), and is awaiting final certification of its HBM3E chip from Nvidia (NVDA.US).

Investors believe that Samsung is also expected to match SK Hynix in the high-profit HBM market for companies such as Nvidia and used for AI applications. Since the beginning of June this year, Samsung's stock price has accumulated a cumulative increase of more than 60% — behind this increase, its core semiconductor division is showing signs of recovery (the division usually contributes 50% to 70% of Samsung's annual profits).

This month, two leading Korean semiconductor companies, Samsung and SK Hynix, reached an agreement with OpenAI to supply chips for the latter's “Stargate” (Stargate) project. The two companies' estimates of chip demand for this project are more than double the current total global HBM production capacity. This data not only highlights the huge size of the “Stargate” project, but also confirms that global AI development is continuing to accelerate.

Combined with factors that continue to rise in memory chip prices, dozens of analysts have recently raised Samsung Electronics' target share price.

MS Hwang, research director at Counterpoint, pointed out that after AI-related investments drove up both the price and sales of general-purpose DRAM (dynamic random access memory) and NAND (flash memory), Samsung may have regained the title of “the world's highest-grossing memory chip manufacturer.”

However, he also warned that at present, the scale of Samsung's shipment of HBM3E chips to Nvidia is still limited. “If Samsung wants to regain its previous market leadership, it needs to continue its current growth momentum into the next generation product, HBM4.”

Previously, Samsung had made many mistakes in the technology research and development process, which gave SK Hynix a significant lead in the lucrative AI chip field; today, Samsung's performance recovery and technological breakthroughs have been achieved in this context.

Samsung said in the latest earnings conference call in July this year that it is expected that high-end memory chip products for servers will achieve “significant growth” in the second half of this year. Park Sooncheol, the company's chief financial officer, also indicated at the time that the company's profits will improve steadily as the annual process progresses.