Samsung Stock Gains as Nvidia Works to Certify Its HBM Chips

(Bloomberg) — Samsung Electronics Co. shares rose after Nvidia Corp. said it is working to certify the company’s high-bandwidth memory chips, a critical step that would allow the Korean company to capitalize on booming demand for AI technologies.

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The stock gained as much as 3.6% in early Wednesday trading in Seoul. Samsung’s shares had dropped about 4% this year before Wednesday’s trading, trailing leading chip players.

Nvidia Chief Executive Officer Jensen Huang told reporters Tuesday his company was examining the so-called HBM chips that Samsung and Micron Technology Inc. offer. Nvidia’s endorsement is needed before either can directly compete with SK Hynix Inc., whose share price has soared since it began supplying Nvidia with HBM3 and more advanced HBM3e chips.

“Despite initial setbacks in gaining Nvidia’s approval for its [eight-layer] HBM3e, we are quite optimistic about approval in the next two to three months,” said Sanjeev Rana, an analyst at CLSA Securities Korea.

Samsung has fallen well behind its smaller rival in that market, which has experienced explosive growth because the chips are used for training artificial intelligence models like ChatGPT. While Samsung hasn’t failed any qualification tests, its HBM product needed more engineering work, Huang told reporters.

“We just have to do the engineering. It’s just not done,” Huang said during a briefing at Computex in Taipei. “I want it to be done by yesterday. But it’s not done yet. We have to be patient.”

SK Hynix’s stock slid as much as 2.3% on Wednesday.

Huang’s comments came after Reuters reported that Samsung was grappling with heat and power consumption issues in its HBMs, which are designed to work in tandem with Nvidia’s AI accelerators.

“There’s no story there,” Huang said when asked directly about that article.

Investors have been concerned about Samsung’s response to SK Hynix, which recently reported its fastest pace of revenue growth since at least 2010. The growing rift is considered one of the key factors behind Samsung’s recent decision to replace the head of its semiconductor division — an unusual step that signaled to investors the company’s resolve to make up lost ground.

In contrast, SK Hynix’s production capacity for such chips is almost fully booked through next year. Given the capacity constraints, Nvidia could benefit from having a strong alternative supplier.

“Nvidia needs more suppliers for HBM,” said Masahiro Wakasugi, technology analyst with Bloomberg Intelligence. “If Samsung can supply the next-gen HBM, then it would help Nvidia.”

Samsung — the world’s largest producer of memory chips overall — says it has already begun mass production of its latest HBM product, eight-layer HBM3E, and plans to mass produce 12-layer versions in the second quarter. The company expects its supply of HBM to increase by at least three times in 2024 compared with last year. Samsung works with Advanced Micro Devices Inc., which competes with Nvidia in AI chips.

“With improving visibility on imminent supply to Nvidia and AMD in the second half of 2024, we anticipate a relief rally in its shares,” said Rana of CLSA.

–With assistance from Vlad Savov and Jane Lanhee Lee.

(Updates with analyst comments from fourth paragraph)

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