Strong AI demand lifts profits

By Finance News On Jul 30, 2024

The Samsung logo is on display at their pavilion during the Mobile World Congress in Barcelona, Spain, on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)

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Samsung Electronics on Wednesday reported higher-than-expected second-quarter revenue and operating profit, as demand for its advanced memory chips that are crucial for artificial intelligence training remained strong.

Here are Samsung’s second-quarter results versus analysts’ average estimates according to LSEG.

Revenue: 74.07 trillion Korean won (about $53.45 billion) vs. 73.74 trillion Korean won
Operating profit: 10.44 trillion Korean won vs 9.53 trillion Korean won

Samsung’s revenue for the quarter ended June jumped 23.42% from a year earlier, while operating profit soared 1,458.2%.

The South Korean giant said robust demand for high-bandwidth as well as conventional memory, such as regular dynamic random access memory, from customers expanding AI investments contributed to the strong performance.

For the second half, Samsung said it expects the demand from server AI to stay strong across server products including HBM, server DRAM and SSD. SDD, or solid-state drive, refers to a semiconductor-based storage device.

The firm added that expanding capacity to meet demand for HBM and server DRAM could further constrain supply of conventional memory chips.

During its earnings call, the firm said it plans to address the AI demand by expanding sales of HBM3E —the latest AI memory product — through capacity expansion in the second half.

It will also expand sales of SSDs which are currently in high demand for AI servers as well.

The firm also said it would pay out a dividend of 361 won per common and preferred share for the second quarter.

“According to our current dividend policy, the total amount distributed per quarter amounts to approximately 2.45 trillion won, which will be paid near the end of August.”

Samsung shares rose as much as 1.35% Wednesday morning.

Memory momentum

HBM memory chips are crucial for AI chips – which have seen a huge demand enabled by the AI boom. This has largely benefitted firms such Samsung Electronics and SK Hynix, the top two memory chipmakers in the world.

“With memory’s average selling prices expected to continue their uptrend for next several quarters we foresee a quarterly sequential profit growth for Samsung Electronics until 2025,” CLSA said in a report earlier this month following Samsung’s second-quarter forecasts.

Business for the world’s largest memory chip maker rebounded as memory chip prices recovered on AI optimism last year. The South Korean electronics giant saw record losses in 2023 as the industry reeled from a post-Covid slump in demand for memory chips and electronics.

“After Nvidia and global chip makers announced an AI semiconductor roadmap recently, we foresee a memory price hike trend until 1H25. We attribute this to greater concerns about memory supply amid robust demand for HBM and high…