Samsung forecasts record Q1 profit amid AI-driven chip boom

Samsung Electronics is set to report a record first-quarter operating profit, nearly six times higher than the same period last year, driven by soaring memory chip prices fueled by the AI boom.

Analysts estimate the company will post 40.5 trillion won ($26.9 billion) in operating income on a 50% rise in revenue, according to an LSEG SmartEstimate based on 29 analyst forecasts. This figure approaches Samsung’s total operating income for the entire previous business year, which was 43.6 trillion won, News.Az reports, citing Reuters.

Some analysts are even more optimistic, with Citi projecting earnings of 51 trillion won. Ko Yeongmin, an analyst at Daol Investment & Securities, noted that “you couldn’t ask for things to be better” in the memory chip market.

Despite the strong earnings outlook, investors are closely watching potential risks from the ongoing war in the Middle East, which has increased energy costs and threatens supply chains for critical production materials. These disruptions could affect investments in AI data centers and overall growth momentum.

While Samsung typically shares detailed guidance later in its earnings report, early market concerns include a slight easing in DRAM chip spot prices due to rising device costs, and the introduction of Google’s memory-saving TurboQuant technology. These factors have contributed to a 14% drop in Samsung’s stock since February 28, though shares remain up 50% year-to-date thanks to large-scale AI investments by Big Tech.

Industry experts remain confident in long-term demand. Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide, said, “The demand and backlog remains strong,” adding that the recent cooling of memory spot prices is temporary. Market researcher Trendforce predicts that conventional DRAM contract prices, which doubled in Q1, could rise another 58-63% in Q2.

Samsung’s co-CEO Jun Young-hyun stated that the company is negotiating three-to-five-year contracts with major clients to protect against market fluctuations. While the memory chip division will generate the bulk of profits, other segments may struggle. Samsung’s contract chip manufacturing unit, which competes with TSMC, is expected to remain unprofitable, though a partnership with Nvidia to build AI inference processors offers potential growth.

The smartphone and flat-screen divisions are likely to see first-quarter profits cut roughly in half due to higher memory costs and intense competition, according to Kiwoom Securities. Additionally, rising labor costs could pose challenges as Samsung’s South Korean unions push for revised bonus schemes and threaten a strike in May.

News.Az 

By Nijat Babayev