The Samsung logo is seen at its booth during the Mobile World Congress in Barcelona, Spain, on February 28, 2024. (Photo by Joan Cross/NurPhoto via Getty Images)
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Shares of Samsung Electronics Co. jumped to their highest level since January 2021 after the South Korean tech giant said it expects better-than-expected second-quarter earnings, thanks to strong demand for artificial intelligence.
The stock rose 2.24% Friday morning, trading as high as 86,500 won ($62.73), according to data from the London Stock Exchange. Samsung shares closed at 84,600 won on Thursday.
Samsung on Friday issued guidance, saying operating profit for the April-June quarter is expected to come in at around 10.4 trillion won ($7.54 billion) — up about 1,452 percent from 670 billion won a year earlier. The forecast operating profit beat LSEG’s estimate of 8.51 trillion won.
The company also said it expects second-quarter revenue to range between 73 trillion won and 75 trillion won, compared with 60.01 trillion won a year earlier. That's in line with LSEG analysts' estimates of 73.7 trillion won.
The world’s largest memory chip maker has been on a rebound as memory chip prices rebounded on optimism over artificial intelligence last year. The South Korean electronics giant posted a record loss in 2023 as the industry was hit by a post-Covid slump in demand for memory chips and electronics.
Its memory chips are commonly found in a wide range of consumer devices including smartphones and computers.
Samsung said in April that it expects the second quarter to be driven mostly by demand for generative AI, while mobile demand will remain stable.
The South Korean tech giant has launched its Galaxy S24 Ultra smartphone, which comes with features to edit photos and search for items online using artificial intelligence.
“Samsung reported an earnings surprise, but the profit surge was mainly due to higher memory prices,” SK Kim, CEO of Daiwa Capital Markets, told CNBC’s “Street Signs Asia” on Friday. “Ironically, Samsung is lagging behind in high-bandwidth memory production. So supplies to Nvidia have been delayed.”
HBM chips are advanced memory chips essential for AI chips — which have seen huge demand thanks to the AI boom. Companies like Samsung Electronics and SK Hynix, the world’s two largest memory chip makers, have benefited greatly from this.
In May, Reuters reported that Samsung had not yet qualified to use Nvidia’s AI processors, with Nvidia reportedly considering Samsung as a potential supplier of HBM chips. Samsung denied the report, saying that tests with multiple partners to supply HBM were “on track.”
“But despite the delay, the company said the earnings surprise was driven by higher memory prices,” Kim said.
“Despite being behind in the most advanced memory products (HBM), they enjoy the benefit of their first-mover capacity and market share, and thus maximize profit with a higher average selling price.”
Samsung is scheduled to release its detailed second-quarter results later this month.
— CNBC's Lim Hui Jie contributed to this report.
