Samsung Electronics shares fall 6% despite Q2 operating income being higher than Nvidia in Q4

Shares of Samsung Electronics Co. fell as much as 6% in early trading in South Korea on Tuesday, July 7, despite its quarterly net profit surging 19x from the same quarter last year led by a relentless demand for memory chips needed in AI-led data centers.

The company's profitability figure also surpassed expectations.

Samsung's preliminary operating income stood at 89.4 trillion won ($58 billion) for the quarter that ended in June. Analysts on average had projected the figure to be 84.2 trillion won. Revenue for the quarter more than doubled to 171 trillion and was also ahead of expectations.

A full financial statement will be released by the company towards the end of this month, which will include its net profit figure and a break-up of the performance of its various divisions.

Samsung's preliminary earnings report was in the spotlight as chip stocks looked to the world's largest memory chip manufacturer to justify the record-breaking investments and valuations surrounding the space. Chip stocks sold-off across Thursday and Friday last week amidst concerns of rotation out of them into hyperscalers. However, some of them saw a rebound on Monday.

A shortage in memory chips is turning out to be a big roadblock to the rapid AI development with industry leaders such as Nvidia CEO Jensen Huang and OpenAI COO Brad Lightcap highlighting the same multiple times. Analysts expect this to last through 2027, giving companies such as Samsung, SK Hynix and Micron significant pricing power. Micron CEO Sanjay Mehrotra also expects only a gradual recovery by 2028.

Analysts also expect the margins of these three chipmakers to be between 75% to 80% for the quarter, citing research firm Counterpoint. The firm goes on to warn that if this situation persists, it may invite regulatory scrutiny.

HSBC reported that DRAM selling prices rose by more than 40% between April-June, while NAND prices were up 50%.

Shares of Samsung are down 6% in early trading in South Korea at 2,98,500 won. The stock is still up 130% so far this year, but has underperformed its crosstown rival SK Hynix, which is up over 250%.