Samsung Estimates More Than 15-Fold Rise In Q2 Profits As AI Boom Lifts Earnings

South Korean tech giant Samsung seems to be on a roll as it just revealed estimates for a massive 15-fold increase in operating profits for Q2 2024.

The news comes amid a rise in AI trends that have enhanced earnings after semiconductor chip prices increased.

The company is the global leader in terms of memory chips, television, and smartphone devices. And seeing figures for operating profits rising to $7.5 billion is huge, as previous reports showed figures to be much less.

This latest profit beat out the LSEG SmartEstimate that comes from analysts who keep on generating the most accurate forecasts. Moreover, this quarter was the most profitable since Q3 of 2022.

Additionally, the much better and promising profit estimates also reflect the firm’s decision to reverse inventory writedowns linked to books as the pricing for chip inventories continues to rebound. So it’s not just a rise in chip prices here that’s worth a mention.

Meanwhile, figures for revenue ended up rising by 23% in Q2 when compared to a similar period one year back.

The company’s shares opened with 1.2% as compared to the 0.4% increase across the wider market. Moreover, the firm is all set to roll out a detailed earnings report from Q2 towards the end of July.

The company’s leading semiconductor division appears like it posted another consecutive profitable report that enhanced the results from Q1 as the trend for rising memory chip costs keeps moving upward during the 2022 to 2023 period. This might have to do with poor post-pandemic demands related to gadgets making use of chips.

There is a huge demand for DRAM chips including those having bigger bandwidths that are commonly seen in chipsets based on AI. The same goes for those utilized in servers across data centers. Meanwhile, those running AI services keep assisting prices for buoy chips to increase as per analysts’ opinion.

During Q2, we saw prices for memory chips rise by nearly 18% when compared to the last quarter. But rises in prices for memory chips could move slower in Q3 as predicted by TrendForce who saw a 5 to 10% rise in DRAM and NAND Flash while older chip demand falls.

Earning calls are clear signs of progress and from this report, we are keen to look at the firm’s outlook regarding legacy chips that would determine if recovery was possible or not by next year.

The demand for chips that are on the higher end of the spectrum could result in outperformance throughout the market as explained by analysts. And while the South Korean tech giant is doing great overall, it’s falling behind another rival of the local industry which is Hynix. The latter is known for supplying HBM chips to clients such as Nvidia.

Meanwhile, chip maker Micron Tech which is based in the US was also witnessed beating out estimates for the newest quarterly revenue that was driven by a huge demand for AI. However, we have to mention the recently published forecast did disappoint investors who are now more upbeat than the rest.

Right now, investors are keen on seeing if Nvidia can give Samsung approval for its supply of 4th Gen HBM chips as results from failed tests conducted in the past did ruin hopes that the company had for securing a deal.

The company underwent a serious shift in positions related to its semiconductor division where it was said to be going through a chip crisis and to combat that, it had its sector head replaced.

Image: DIW-Aigen

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