Samsung Electronics on Tuesday flagged a staggering 19-fold jump in second-quarter operating profit, surpassing its combined earnings over the past three years. Yet in a stark illustration of AI market anxiety, investors wiped more than $80 billion off the company's market value on concerns that the AI boom may be cooling.
The South Korean tech giant estimated April-June operating profit at 89.4 trillion won ($58.44 billion), beating an LSEG SmartEstimate of 87.3 trillion won. Revenue rose 129% to 171 trillion won from a year earlier, driven by the AI data centre boom that has propelled memory chip prices to record highs.
Despite the blockbuster results, Samsung's shares dropped as much as 10.1% on Tuesday, closing down 6.9%. Rival SK Hynix fell 6%, dragging South Korea's benchmark KOSPI index down 4.9%.
The AI Paradox
The contrast between profit and share price tells a story of deep market uncertainty. Samsung has been one of the biggest beneficiaries of the AI infrastructure buildout, with surging demand for high-bandwidth memory (HBM) and conventional DRAM and NAND chips.
But investors are increasingly worried that the party may not last. The big US technology companies — Meta, Microsoft, Amazon, and Alphabet — may need to borrow heavily to fund AI infrastructure with uncertain returns, which could eventually dampen chip demand.
"Samsung's strong earnings were widely expected and had largely been priced in after its shares rallied ahead of the results," said Albert Yong, a managing partner at Petra Capital Management. "Investors remain concerned about the sustainability of the AI boom and the risk of slower AI infrastructure spending."
Slower Growth Ahead?
Memory chip prices continued their upward march during the quarter, with Citi Research reporting that average selling prices for DRAM and NAND rose 44% and 53% quarter-on-quarter respectively. But Morningstar analyst Jing Jie Yu noted that Samsung's revenue estimate was not as strong as expected.
Morgan Stanley warned on Monday that the run in semiconductor stocks was losing momentum after a historic rally, as investors brace for "more capex discipline in the near-term" from hyperscalers.
Record Bonuses and Big Bets
Samsung's profit surge came even as it set aside funds for sizeable bonuses to semiconductor workers under a May wage deal linking pay to operating profit. Without those provisions, analysts said operating profit would likely have exceeded 100 trillion won.
Samsung and SK Hynix last week announced investments worth hundreds of billions of dollars in new capacity — among the biggest bets yet on the AI boom. But the planned capacity buildout has itself stoked fears of a painful reckoning if AI spending eventually cools.
Samsung plans to announce detailed second-quarter results on July 30, including a breakdown of earnings by business division.
