Samsung Profits Skyrocket Due to AI Growth
Samsung Electronics predicts a 15 times profit rise in the second quarter of 2024 compared to the same time last year. This is largely due to the increased use of artificial intelligence (AI), which has pushed up demand for high tech computer chips.
Massive Profit Increase
World Renowned South Korean tech company Samsung, well known for being the producer of memory chips, smartphones, and TVs, predicts profits will reach up to 10.4 trillion won ($7.54 billion) during the three months that end in 2024. The anticipated amount is a big jump from last year’s 670 billion won.
Samsung’s shares rose more than 2% in Seoul following early trading after news broke out. The company earlier reported huge profit increases for this year’s first quarter, indicating more than ten times growth.
Impact of AI Growth and Market Reaction
Marc Einstein, chief analyst at ITR Corporation based in Tokyo, emphasises that increasing demand for AI chips in data centres and smartphones is a significant driver behind Samsung’s earnings rise. This positive view about AI has led to a general market growth over the previous year, pushing indices like S&P 500 and Nasdaq to fresh records.
Last month saw another chip making giant Nvidia’s market value briefly exceed $3 trillion highlighting how greatly AI development is influencing this sector.
Quarterly Performance and What Markets Anticipate
Between April and June Samsung anticipates an operating profit around 10.4 trillion won, much higher than analysts’ forecasted approximately 8.8 trillion won. The company also foresees its second quarter’s revenue between 73 trillion and 75 trillion won which is an increase from 60.01 trillion won last year.
- Expected profit, 10.4 trillion won
- Predictions by analysts, 8.8 trillion Won
- Expected revenue, 7375 trillion won
- Last year’s revenue, 60.01 trillion won
The shares of Samsung went up to as much as 2.24% on receipt of the news, marking its highest rate since January 2021.
Issues and Future Prospects
Despite Samsung’s positive future, it faces hurdles. Workers’ union demands include a clear system for bonuses and holidays and a possible three day strike is scheduled for next Monday.
In addition, even though Samsung leads in memory chip production, SK Hynix comes first in the high bandwidth memory (HBM) production sector, a crucial element in AI chipsets that are in heavy demand owing to the AI boom.
Analytical Observations from Industry Experts
“Rising costs of memory chips are mainly responsible for Samsung’s unexpected earnings,” says SK Kim of Daiwa Capital Markets. While acknowledging that Samsung lags behind in qualifying for Nvidia’s AI processors he points out that it gains from its strong market share and selling prices averaging on the higher side.
Samsung’s experimenting with generative AI through its Galaxy S24 Ultra smartphone equipped with advanced AI features is another factor contributing to the company’s positive future outlook. It anticipates mobile demand stability, driven mainly by concerns relating to AI.
Final Thoughts
In summary, thanks to the growth in AI technology and rising demand for high end memory chips, Samsung Electronics predicts a huge rise in profits during the second quarter of 2024. Despite facing some issues, the company’s focus on AI innovations and strong market position is likely to maintain its growth.
Samsung will release comprehensive second quarter results later this month to provide additional insights regarding its performance and future expectations.