Samsung expects a 15-fold jump in profitability, thanks to AI

In this post:

  • Samsung has announced an anticipated significant jump in profitability.
  • The growth is attributed to a strong demand for chips due to AI services.
  • Following the announcement, Samsung shares rose 2% in early trading hours in Seoul.

Samsung Electronics on Friday announced it is expecting a 15-fold increase in operating profit for the second quarter of 2024, driven by AI. The firm revealed the demand for semiconductors helped to increase earnings.

Also read: Samsung Reclaims Software Update Lead Amid Growing Competition

The smartphone maker expects its operating profit for the quarter till June 30, to surge 1,400% to 10.4 trillion won/$7.54 billion from 670 billion won during the same quarter last year.

Samsung’s profitability beat expectations

According to Reuters, the expected operating profit beats the 8.8 trillion won LSEG SmartEstimate, which is weighted “toward forecasts from analysts who are more consistently accurate.”

The second quarter period was the most profitable since the third quarter of 2022.

The Reuters report further explains that outside firm chip prices during the quarter, the performance also reflects the tech firm reversing its prior inventory writedowns on its books, “as the value of its chip inventory has rebounded in accounting terms.”

Revenue for the period is also expected to be on the upside, likely to increase by 23% to 74 trillion won.

AI drives demand for chips

In 2023, the company recorded losses as economies emerged from the COVID-19 pandemic, with depressed demand for electronics and memory chips.

Samsung’s memory chips are used in several of the company’s products, and the increased demand for AI services has boosted chip sales.

Also read: Samsung has Developed Fastest 10.7Gbps LPDDR5X DRAM for AI Applications

Commenting on the increased demand for chips, Marc Einstein, chief analyst at Tokyo-based research and advisory firm ITR Corporation said:

“Right now, we are seeing skyrocketing demand for AI chips in data centers and smartphones.”

According to BBC, optimism around AI has been a major contributor to the market rally experienced over the last year.

Last month, chip-making giant Nvidia’s market value surged to over $3 trillion as the firm briefly held the world’s most valuable firm, although it is now behind Microsoft and Apple.

“The AI boom which massively boosted Nvidia is also boosting Samsung’s earnings and indeed those of the entire sector,” added Einstein.

Meanwhile, Samsung’s announcement pushed its shares to jump 2% during the early trading hours in Seoul.

Cryptopolitan reporting by Enacy Mapakame

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