Samsung’s stock marks three-year high after profit leaps 15-fold

(Bloomberg) — Samsung Electronics Co. (005930.KS) posted its fastest pace of sales and profit growth in years, reflecting a recovery in memory chip demand as AI development accelerates globally.

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The world’s largest maker of memory chips and smartphones posted a 15-fold surge in operating profit to 10.4 trillion won ($7.5 billion) in the June quarter, outstripping analysts’ projections. Sales grew around 23%, the biggest rise since Covid-era highs clocked in 2021. The stock rose as much as 2.3% to its highest since January 2021.

The results underscore how the $160 billion memory market is bouncing back this year from a severe post-Covid downturn, driven by a boom in datacenters and AI development. That demand pushed average memory chip prices 15% higher from the previous quarter, CLSA estimates, helping Samsung’s largest division reverse losses last year.

Both DRAM and NAND prices were lifted by demand for AI servers and enterprise data storage, helping to reverse inventory valuation losses, said Sanjeev Rana, an analyst at CLSA Securities Korea. Samsung’s foundry, or contract chipmaking, operations also got a boost from improved IT demand, he said.

South Korea’s government said this week the country exported the most semiconductors on record in June, driving its trade surplus to $8 billion — the largest since 2020.

Samsung is slated to announce final earnings with divisional breakdowns on July 31. While the company is benefiting from a broader industry recovery, investors remain concerned about its market position in the newer field of AI chips against SK Hynix Inc. (000660.KS)

Its shares have lagged its smaller rival, now the leading supplier of high-bandwidth memory or HBMs, a vital component of AI hardware. It’s struggled to get its latest HBM chips certified by Nvidia Corp. (NVDA), which has become the world’s most valuable chipmaker thanks to insatiable demand for AI accelerators.

Samsung is unveiling results days before union organizers plan to stage a three-day walkout among its 28,000-plus members — including at key chip plants — over a pay dispute. The proposed action follows a strike involving a small number of staff last month that was the first in the company’s 55 years. It’s unclear for now how many employees intend to participate in Monday’s walkout.

Longer term, Samsung’s focus remains on winning more business in AI memory, while at the same time allaying fears of oversupply.

Investors have become increasingly concerned about Samsung’s response to SK Hynix, which recently reported its fastest pace of revenue growth since at least 2010. That’s propelled a roughly 60% rally in SK Hynix shares since the start of 2024, compared with a gain of about 8% for Samsung’s stock.

Samsung in May unexpectedly named Jun Young Hyun — a memory chip veteran who is returning to the company after leading Samsung SDI Co. — as the new leader of its most important business line, replacing Kyung Kye-hyun.

In previous quarters, solid sales of Samsung’s smartphones helped it ride out sluggish chip demand. South Korea’s biggest company is holding a Galaxy Unpacked event in Paris next week in a bid to sustain momentum for its phones.

—With assistance from Vlad Savov.