With HBM Weighing Down, Could AI Propel Samsung's Stock Performance?

Samsung Electronics Co SSNLF is projected to witness a significant rise in its first-quarter operating profit, but its stock has underperformed due to HBM.

What Happened: The South Korean tech giant’s first-quarter operating profit is expected to reach 6.6 trillion won ($4.9 billion), marking a tenfold increase from the same period last year. This surge indicates a recovery in the memory semiconductor market, which has been in a slump for the past two years, Reuters reported on Wednesday.

Analyst Kim Roko from Hana Securities pointed out that Samsung’s stock has underperformed due to HBM, despite the company’s efforts in this area. “Samsung is working hard on HBM, but nothing is visible yet…Compared to competitors, Samsung stock has underperformed due to HBM,” said Roko.

“It may be difficult to increase market share with the 8-layer HBM3E currently being released, but no company has yet received approval for the 12-layer version expected near year-end. I think Samsung may pass on what it has not been able to do and win with more advanced products.”

See Also: Jim Cramer Slams Cathie Wood’s ‘Bold’ Claims Of 80% Vehicles Being EV In A Few Years: ‘Painful’

With a rebound in global consumer demand for electronics, tech companies are starting to replenish their chip supplies. The average selling price for DRAM chips rose by over a fifth in the three months to March, as per Bernstein analysts.

Most of Samsung’s operating profit comes from semiconductors, and it is expected to more than double its earnings this year, according to LSEG analysts. AI customers, such as Nvidia, are driving demand for more specialized and customized storage chips, which could stabilize the historically volatile market.

JPMorgan analysts predict that Samsung’s HBM revenue could reach $13 billion in 2025, accounting for 13% of its total semiconductor sales. This could help cushion market volatility in the long term.

Why It Matters: In February, Samsung introduced a new memory chipset to revolutionize the AI industry. In March, Nvidia showed interest in Samsung’s next-generation high-bandwidth memory (HBM) chips, causing a significant surge in Samsung’s stock.

Nvidia’s CEO, Jensen Huang, predicted that the current "AI computing ramp" is just the beginning and is expected to continue for several years. This series of events underscores the potential of AI in reshaping the memory chip market.

Read Next: ‘Don Lemon Show’ Views Tank By Over 90% After Elon Musk Interview On X Platform

Image Via Shutterstock