Samsung profits plummet 56%, though stock is up, as company struggles to win Nvidia AI chip deals

Samsung Electronics expects second-quarter operating profits to plummet 56% to 4.6 trillion won as the South Korean tech giant struggles to capture demand from AI chip leader Nvidia. The disappointing forecast, which fell short of analyst expectations by nearly 27%, highlights Samsung’s difficulty competing with rivals like SK Hynix and Micron in the crucial high-bandwidth memory (HBM) chip market that powers AI applications.

What you should know: Samsung’s projected earnings represent a significant miss compared to analyst forecasts and reflect deeper structural challenges in the AI chip supply chain.

• Operating profit is expected to drop to 4.6 trillion won ($3.36 billion) for the quarter ending June, down from 10.44 trillion won year-over-year.
• Revenue is projected at 74 trillion won, missing the LSEG SmartEstimate of 75.55 trillion won.
• The company’s shares fell as much as 1.13% in early trading following the earnings guidance release.

The big picture: Samsung’s struggles underscore how critical Nvidia’s supplier certification has become for memory chip manufacturers seeking to capitalize on the AI boom.

• SK Hynix has secured a dominant position as Nvidia’s key HBM supplier, controlling roughly 70% of global HBM demand.
• Samsung has reportedly been working to get its latest HBM chips certified by Nvidia, but certification has been pushed back to at least September.
• The company has secured some HBM supply deals with AMD for AI processors, but these wins are unlikely to impact second-quarter results due to production timing.

Why this matters: Samsung’s difficulties highlight the concentrated nature of AI chip demand and the high stakes of supplier qualification processes.

• “Given that Nvidia accounts for roughly 70% of global HBM demand, the delay meaningfully caps near-term upside,” said Ray Wang, research director at Futurum Group.
• High-bandwidth memory chips are essential for AI applications, representing a high-margin business opportunity that Samsung is struggling to capture.
• The company’s foundry business continues facing weak orders and intense competition from Taiwan Semiconductor Manufacturing Company.

What’s hurting performance: Multiple factors contributed to Samsung’s profit decline beyond just missing AI opportunities.

• Inventory value adjustments impacted quarterly results.
• U.S. restrictions on advanced AI chips for China reduced demand.
• The foundry business continues experiencing operating losses.
• “The upside in the high-margin HBM business remains muted this quarter,” explained MS Hwang, research director at Counterpoint Research.

What they’re saying: Samsung acknowledged the HBM certification delays while expressing optimism about future progress.

• The company declined to comment on specific deals with Nvidia but said “improved HBM products are proceeding with customer evaluation and shipments.”
• Ray Wang noted that “it is clear that Samsung has yet to pass Nvidia’s qualification for its most advanced HBM.”
• Reuters reported in September that Samsung had instructed subsidiaries worldwide to cut 30% of staff in some divisions.

Looking ahead: Samsung’s stock remains up over 16% year-to-date despite the challenging quarter, with detailed results expected later this month.