(July 7): Samsung Electronics Co’s quarterly profit surged 19-fold but failed to impress investors used to eye-catching growth numbers from the suppliers of chips to the global artificial intelligence (AI) boom.

The company’s shares slid more than 10% in Seoul, leading a plunge in the benchmark Kospi that triggered a brief circuit-breaker suspension. That’s with investors having largely priced in hefty profit margins from a historic build-out of AI infrastructure worldwide. South Korea’s largest company on Tuesday posted preliminary operating income of 89.4 trillion won (US$58.0 billion or RM238.8 billion) in the three months through June, beating projections by about 6%.

Earnings by the world’s largest memory maker are in the spotlight as investors seek to justify sky-high investments and valuations around AI. Global semiconductor shares jumped to record levels earlier this year, but have hit turbulence on fears about increased competition, possible overcapacity and whether plans for hundreds of billions of dollars in investment will pay off.

“The figures, while extraordinary on an absolute basis, aren’t that much better than what the Street was modelling for a stock sitting at the epicentre of the hottest sector in the whole market,” said Adam Crisafulli, the founder of Vital Knowledge.

Revenue more than doubled to 171 trillion won. Samsung reported record quarterly profit despite provisions to pay big bonuses for chip employees of as much as US$400,000 this year — a windfall that’s escalating a national debate about what constitutes fair compensation.

The sudden bonanza in AI-generated wealth reflects a growing shortage in memory chips that’s become a critical bottleneck for AI development. And because manufacturers are giving priority to high-end memory development to meet data centres’ needs, conventional memory prices are rising as well, endangering profits throughout the tech landscape. 

Analysts expect memory shortages to last through 2027 at least, giving Samsung and rivals SK Hynix Inc and Micron Technology Inc enormous pricing power. DRAM selling prices rose more than 40% in the April-June quarter from the previous three months, while NAND prices jumped more than 50%, according to HSBC.

“Demand is so strong that they are trying to ship more products to their server customers, which typically tends to carry higher margins,” said Sanjeev Rana, the head of research at CLSA Securities Korea about Samsung’s results. The company may be asking for significant price increases from big customers, he said.

Average operating profit margin for the three chipmakers likely trended around 75% to 80% in the June quarter, according to market research firm Counterpoint. That may raise concerns about excessive profiteering by memory makers and lead to regulatory pressure if the situation continues, it said in a report. 

Shares of Japan’s Kioxia Holdings Corp, which competes with Samsung in NAND flash memory, fell as much as 12% in Tokyo, while chip gear suppliers such as Tokyo Electron Ltd and Screen Holdings Co also lost ground. Disco Corp, which supplies dicers and grinders that shape silicon wafers into chips, fell as much as 7.7%, despite preliminary sales data indicating strong demand.

“I don’t think the market adequately understands how good these numbers are,” Counterpoint director Tom Kang said. Memory price increases were even steeper towards the end of the second quarter, compared with the beginning of the quarter, he said. “The boom will definitely continue in the coming quarters.”

Samsung is slated to release a full financial statement, including net income and divisional breakdowns, around the end of the month.

Shares of Samsung, which also makes consumer electronics, displays and logic chips, have underperformed cross-town rival SK Hynix’s, which is more focused on high-bandwidth memory geared for AI’s computation needs. Samsung’s shares, which were hurt by a sell-off in the five days to last Friday, are up around 150% this year, compared with SK Hynix’s roughly 250% gain.

The two chipmakers are central to South Korea’s ambitions to pull ahead of other countries to take leadership in AI, and are under pressure to boost memory supplies. Samsung Group and SK Group plan to build two chipmaking plants apiece in the nation’s southwest for a total of 800 trillion won to expand capacity quickly. The country aims to double its memory production capacity within five years.

For 2026, Samsung has announced plans to spend over US$70 billion in production capacity expansion and research.

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