Samsung Shares Tumble Despite 19-Fold Profit Forecast Amid AI Demand Jitters

Samsung Electronics on Tuesday projected a staggering 19-fold surge in its second-quarter operating profit, driven by the unprecedented demand for memory chips used in artificial intelligence. Despite beating analyst expectations, the company’s shares fell significantly as investor anxiety mounted over a potential slowdown in the AI infrastructure boom.

Blockbuster Guidance Meets Market Skepticism

In a regulatory filing, the South Korean technology giant estimated its operating profit for the April-June period would be 89.4 trillion won ($58.44 billion). This figure marks a dramatic increase from the 4.7 trillion won reported in the same quarter a year earlier and surpasses the 87.3 trillion won LSEG SmartEstimate.

The company also forecast that revenue would likely jump 129% to 171 trillion won. However, the positive guidance was met with a sell-off in the market. Samsung's shares closed down 6.9%, while rival SK Hynix fell 6%, contributing to a 4.9% decline in South Korea's benchmark KOSPI index.

AI Sustainability in Question

The market's negative reaction highlights growing concerns that the explosive growth in AI-related spending by major U.S. tech companies may be unsustainable. Analysts attributed the stock decline to worries that these "hyperscalers" could curb their infrastructure investments, dampening future demand for high-performance memory chips.

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"Samsung’s strong earnings were widely expected and had largely been priced in," said Albert Yong, a managing partner at Petra Capital Management, in comments to Reuters. "Investors remain concerned about the sustainability of the AI boom and the risk of slower AI infrastructure spending by major U.S. technology firms."

This sentiment was echoed in a recent Morgan Stanley report, which noted that the semiconductor sector's rally was losing momentum as investors brace for "more capex discipline in the near-term" from major cloud and AI players.

Under the Hood of the Results

The profit surge was fueled by soaring prices for memory chips. According to Citi Research, average selling prices for DRAM and NAND chips rose 44% and 53% quarter-on-quarter, respectively. However, some analysts noted that Samsung's revenue estimate was slightly below the most aggressive expectations, potentially spooking investors.

Samsung's profit guidance was achieved even after accounting for significant bonuses for its semiconductor employees. Analysts cited by Reuters suggested that without these provisions, the company's operating profit could have exceeded 100 trillion won. Samsung is scheduled to release its detailed earnings report, including divisional breakdowns, on July 30.