Samsung's 84.6 trillion won profit fails to lift shares as AI doubts linger

Samsung Electronics' semiconductor division is on track to generate more profit in 2026 than the company accumulated in its previous 40 years in the chip business, President Kim Yong-kwan told employees at a July 3 town hall meeting.

"The DS division's operating profit this year will meet market expectations," Kim, who heads business strategy at Samsung's Device Solutions unit, said at the meeting, according to local media reports.

Analysts expect Samsung to report second-quarter operating profit of 84.6 trillion won ($55.1 billion) when it releases preliminary results Tuesday, up 1,700% from a year earlier. Revenue is projected at 176 trillion won, a 136% increase. Excluding about 20 trillion won in employee performance bonuses, underlying operating profit could exceed 100 trillion won — a level no global technology company outside Saudi Aramco has reached. For the full year, analysts have raised their consensus to 374 trillion won in operating profit, according to Yonhap Infomax.

Yet Samsung shares failed to rally on the news, reflecting growing concern that the AI-driven semiconductor cycle may be approaching a peak. The stock's muted response suggests investors are questioning how long elevated memory prices can persist as capacity expansion remains years from yielding meaningful output.

Memory Prices Surge as Supply Stays Tight

Samsung has raised commodity DRAM prices by 90% in the first quarter and 50% to 60% in the second quarter, relative to reference prices from late 2025. The company is now negotiating another increase of as much as 20% for the third quarter. LPDDR5X 12GB contract prices — a key input for smartphones and servers — have climbed to $145 per unit, up $68.8 since the start of the year.

The price surge reflects an AI-driven demand boom that has outstripped supply. Samsung began mass-producing HBM4, the sixth generation of high-bandwidth memory, becoming the first company to ship the product commercially. HBM4 stacks multiple memory dies vertically to accelerate AI workloads, offering higher bandwidth than its predecessor HBM3E while consuming less power per bit transferred.

Samsung and rival SK hynix have announced a joint $800 billion fab expansion plan in South Korea, but the initiative won't generate meaningful production volumes until 2033, according to the companies. That timeline suggests elevated memory prices could persist for years, benefiting both manufacturers but raising costs for buyers such as Apple and Nvidia.

What the Stock Reaction Means for the AI Trade

The disconnect between Samsung's earnings and its stock price carries implications beyond the company itself. If the world's most profitable semiconductor enterprise can't get a post-earnings bump, it may suggest that the AI trade broadly — spanning Nvidia, SK hynix and TSMC — is pricing in perfection.

Nvidia posted $53.5 billion in operating profit in its fiscal first quarter. Samsung's $55.1 billion Q2 figure would surpass that, making it the world's most profitable company by operating income. But the market's reaction suggests investors are looking past this quarter's record to question whether the AI investment cycle has further to run.

Some analysts have raised the possibility that the semiconductor cycle could peak in the near term, but Samsung is expanding long-term supply agreements with global technology companies and moving to increase production capacity. The direction of this debate will hinge on what management signals about AI memory demand and HBM4 supply expansion when it releases detailed results later this month.

Samsung's consumer-facing Device Experience division, which handles mobile phones, TVs and home appliances, is expected to post a comparatively weak quarter. The mobile business is forecast to generate operating profit of between 500 billion won and 1 trillion won, while the TV and appliance units may each come in below 100 billion won, as rising semiconductor component costs squeeze margins on finished products.

This article is for informational purposes only and does not constitute investment advice.