Samsung Operating Profit Set for 1,800% Surge Driven by AI

Samsung operating profit is on course for one of the most dramatic single-quarter turnarounds in the company’s history — analysts are forecasting a roughly 1,800% year-on-year surge for Q2 2024, and the reason is straightforward: the world can’t build AI infrastructure fast enough, and Samsung makes the memory chips that go inside almost all of it.

• Samsung operating profit is expected to soar roughly 1,800% year-on-year in Q2 2024, driven by surging AI chip demand.
• Samsung operating profit recovery is largely fuelled by explosive demand for high-bandwidth memory used in AI accelerators.
• The results mark a dramatic turnaround from 2023, when a global chip glut pushed Samsung to its worst profits in over a decade.
• Samsung still faces pressure from rivals SK Hynix and Micron, who have moved faster to supply HBM chips to customers like Nvidia.

From Catastrophe to Comeback: What Changed for Samsung Operating Profit

To appreciate how staggering this rebound is, you have to remember where Samsung was just twelve months ago. Throughout 2023, the company was grinding through one of the worst downturns in semiconductor history. A pandemic-era buying frenzy had left the industry swimming in excess inventory, prices for DRAM and NAND flash collapsed, and Samsung posted its worst quarterly operating profit figures in over a decade. At one point the chip division — historically the engine of the entire business — was burning through cash at an alarming rate.

Then the AI wave hit with a force that frankly caught most of the industry off-guard in terms of sheer speed and scale. Hyperscalers like Microsoft, Google, Amazon, and Meta started spending at a pace that made even bullish forecasts look conservative. Nvidia couldn’t ship H100 GPUs fast enough. And every one of those GPUs needs high-bandwidth memory — a specialised, expensive type of DRAM that Samsung, SK Hynix, and Micron are among the very few companies on the planet capable of producing.

The result? Memory pricing has recovered sharply across the board. Spot prices for DRAM modules climbed throughout late 2023 and into 2024, contract pricing followed, and Samsung operating profit margins — which had been crushed by the glut — started expanding again at pace. That’s the mechanical explanation for the 1,800% figure. The more interesting question is whether it holds.

The HBM Race Samsung Can’t Afford to Lose

Here’s where the story gets more complicated. Not all memory is created equal in the AI era, and the segment that commands the richest margins right now is high-bandwidth memory — HBM. This is DRAM stacked vertically in multiple layers using through-silicon vias, delivering data throughput that conventional DRAM simply can’t match. For AI training runs that churn through petabytes of data, HBM isn’t a nice-to-have. It’s a hard requirement.

The uncomfortable reality for Samsung is that rival SK Hynix got to the latest generation — HBM3E — first, and more importantly, got it qualified and into Nvidia’s supply chain ahead of everyone else. Hynix has been the dominant supplier of HBM to Nvidia, and that position has made it the single biggest beneficiary of the AI memory boom on a per-chip-sold basis.

Samsung has been working to close the gap, but qualification delays have been widely reported, and in a market where Nvidia’s allocation decisions effectively determine who wins and who waits, those delays carry real cost. Micron, the American memory giant, has also been making credible progress on its own HBM3E product and is actively competing for Nvidia supply agreements.

None of this negates the Samsung operating profit recovery — the sheer volume of conventional DRAM and NAND flash it sells means even a broad market upturn moves the needle enormously. But it does mean the company is winning the recovery trade while still fighting to win the premium AI memory trade, and those are two different battles.

The Numbers in Context

Analyst consensus heading into the Q2 2024 preliminary results pointed to Samsung operating profit coming in substantially higher than the same period a year earlier — a period when profits had been severely depressed by the chip glut. Even at the low end of estimates, that represents a dramatic increase in absolute terms, and the 1,800% headline figure reflects just how depressed the prior-year comparison base was.

Samsung’s semiconductor division, formally known as Device Solutions, is expected to account for the bulk of the Samsung operating profit swing. The consumer electronics and mobile divisions have been comparatively stable — Samsung’s Galaxy S24 lineup has sold reasonably well, and the company’s display business benefits indirectly from the same AI-hardware buildout driving chip demand. But memory is the story here. It almost always is when Samsung has a big earnings quarter.

For context: Samsung is the world’s largest memory chip maker by volume, with a significant share of the global DRAM market. When memory prices move, Samsung operating profit feels it more than any other company on earth. The flip side of that is the 2023 experience — the same scale that amplifies the upside also amplified the pain on the way down.

What the AI Chip Boom Means Beyond One Quarter

The broader implication of Samsung’s recovery is what it tells us about where capital is flowing in the tech industry right now. The AI infrastructure buildout is not a short-cycle event. Microsoft has committed to spending heavily on data centres. Google and Amazon are spending at comparable scale. Meta has been publicly aggressive about its AI capex plans through 2024 and beyond.

All of that spending eventually translates into demand for chips, and chips need memory. The question analysts are wrestling with isn’t whether demand is real — it clearly is — but whether supply will catch up fast enough to pressure pricing again. Samsung, Hynix, and Micron are all investing heavily in new HBM capacity, but HBM is genuinely difficult to manufacture and the lead times for new capacity are long. A supply crunch in premium memory could persist well into 2025, providing further support for Samsung operating profit through the near term.

There’s also a geopolitical dimension worth watching. The US has been progressively tightening export controls on advanced chips to China, and Samsung — which operates major manufacturing facilities in Xi’an — has had to navigate that carefully. Any further escalation of semiconductor trade restrictions could complicate both supply chains and end-market access in ways that are hard to model cleanly right now.

Samsung’s Road Ahead

A single strong quarter doesn’t erase the structural questions facing Samsung’s chip business — the HBM qualification gap with Hynix, the need to keep pace on process technology with TSMC on the foundry side, and the ever-present risk of another inventory correction if AI spending momentum slows unexpectedly.

But the 1,800% Samsung operating profit recovery does confirm something important: the AI-driven semiconductor cycle is real, it’s large, and it’s benefiting even the players who aren’t perfectly positioned in every niche. For Samsung, the immediate priority is converting this broad market tailwind into a durable premium position in HBM — because that’s where the next cycle of margin expansion will be decided. If it can get its HBM3E supply into Nvidia’s next-generation Blackwell platform at scale, the Samsung operating profit story gets even more interesting in 2025.

Source: Yahoo Finance

Frequently Asked Questions