South Korean tech giant Samsung Electronics has released a preliminary operating profit forecast for the second quarter, which has stirred up the market. The figure is expected to reach 89.4 trillion won ($58.4 billion) — 19 times higher than the same period last year. This number not only broke all previous company records but also exceeded analysts' consensus forecasts.
However, the stock market's reaction was more than restrained. At the opening of trading, Samsung shares plunged more than 6%, continuing a correction after an impressive fivefold increase over the past 12 months. It seems paradoxical: record profits and a drop in stock prices. But for an experienced eye, there is nothing surprising here.
Artificial Intelligence as the Main Driver
The key factor behind the explosive profit growth is the boom in the semiconductor market, driven by the global race in artificial intelligence. Demand for memory for AI systems, especially high-performance HBM modules, as well as traditional chips for servers, PCs, and smartphones, remains extremely high. According to my data, DRAM prices surged by 44% during the quarter, while NAND flash prices rose by 53%.
The active reallocation of production capacity in favor of HBM is creating a shortage in the standard memory market. This forces major clients to sign long-term contracts, guaranteeing Samsung high selling prices for at least the next year. Moreover, a recent agreement with the union linking bonuses to operating profit added significant one-time payments to the report. Without them, operating profit could have exceeded 100 trillion won, according to estimates.
Profit Taking and the Shadow of the AI Bubble
The drop in shares is classic profit-taking after a powerful rally. Investors who multiplied their capital fivefold over the year chose to cash out, not waiting for a potential correction. Additionally, the market remains extremely nervous due to fears of overheating in the AI sector. Warnings about a possible "artificial intelligence bubble" have already hit some memory suppliers, although giants like Micron continue to grow.
Samsung itself confirms long-term plans: the company announced its intention to invest 2,100 trillion won in South Korea's economy by 2040. However, the schedule for these investments will be adjusted depending on market conditions.
My analysis: The current correction in Samsung shares is not a trend reversal but a healthy pause. The fundamental drivers related to AI remain in place. Building new factories is a multi-year process, so supply in the memory market will be limited. The main risk for the bullish scenario is not a slowdown in AI demand but a potential slowdown in capital expenditures by the largest data centers. But for now, this is just a hypothesis.