SEOUL – Samsung Electronics (005930.KS) is forecasting its largest quarterly operating profit in over three years, a significant earnings beat that highlights a profitable, and somewhat unexpected, side effect of the global artificial intelligence (AI) arms race: a surge in conventional memory chip pricing.
The world’s leading memory chipmaker estimated an operating profit of 12.1 trillion won ($8.5 billion) for the July-September period, a robust 32% increase from a year earlier and well ahead of the 10.1 trillion won LSEG SmartEstimate. This marks the company’s best quarterly profit in 13 quarters. Samsung shares reacted immediately, rising as much as 2.9% to their highest level since January 2021, cementing a remarkable 79% year-to-date gain.
The AI-Driven Commodity Surge
The primary driver of the earnings surprise, according to analysts, stems from its core chip business, specifically the demand for commodity DRAM and NAND chips used in AI data center servers.
As memory makers globally pivot investments and production capacity toward advanced High Bandwidth Memory (HBM) chips for AI giants like Nvidia (NVDA.O), a supply shortage has been created in conventional memory markets. This supply crunch, coupled with low chip inventory, has given manufacturers significant bargaining power.
- Price Spike: Data from TrendForce shows that prices for some DRAM chips, widely used across servers, smartphones, and PCs, jumped an astounding 171.8% in the third quarter from a year earlier.
- Outlook: Analysts expect this commodity memory supply shortage and resulting price strength to continue, potentially lasting into 2026.
This strong performance in conventional chips successfully offset weaker sales of Samsung’s advanced AI chips, where the company has been lagging behind key rival SK Hynix (000660.KS).
Record Revenue and Foundry Gains
Beyond the chip profit, the company is also forecasting a record high revenue of 86 trillion won, an 8.7% rise from the prior year. This revenue boost was partially attributed to the weaker South Korean won, which favors the country’s exporters. Additionally, Samsung is benefiting from narrower losses at its foundry unit, which produces logic chips, due to improved utilization rates easing fixed-cost pressures.
The Road Ahead: HBM Competition
While the commodity chip rally has been a significant boon, investors remain focused on the company’s progress in the crucial HBM sector. Samsung lost its No. 1 DRAM market share to SK Hynix earlier this year, underscoring the intensity of the competition.
Though recent chip supply deals with major tech companies like Tesla and OpenAI have eased some investor anxieties, the firm’s HBM volume shipments remain limited. Samsung is now aggressively betting on its next-generation HBM4 products to narrow the gap. Morgan Stanley reports that Samsung is on track with HBM4 development, working closely with major U.S. customers, with commercial sales contributions anticipated to begin in 2026.
Investor Risks and Geopolitical Headwinds
Despite the bullish outlook for memory pricing, investors must weigh several uncertainties:
- Geopolitical Risk: Potential U.S. tariffs could hurt global chip demand.
- Trade War: The intensifying trade war between the U.S. and China, alongside China’s tightened export controls on rare earth materials, poses significant hurdles for the advanced chip supply chain.
- Competition: Continued strong performance from rivals like SK Hynix and Micron (MU.O) will pressure Samsung to execute flawlessly on its next-generation HBM roadmap.
Samsung is scheduled to release its detailed earnings results, including a breakdown for each business unit, on October 30. The results will provide further detail on how long the tailwinds from the commodity chip crunch can sustain the tech giant’s profitability.
