Samsung profit soars to 3-year high on AI chip surge

Samsung Electronics Co. has reported its highest quarterly profit in over three years, driven by a surge in demand for AI-related memory chips. The world’s biggest memory chipmaker and South Korea’s most valuable company is riding the artificial intelligence wave that has reshaped the global semiconductor market.

Samsung’s operating profit in the July-September quarter jumped to 12.1 trillion won ($8.5 billion), surpassing analysts’ forecasts of about 9.7 trillion won, according to preliminary results released on Tuesday. Revenue increased to 86 trillion won, a steep gain from the previous year’s 67.4 trillion won.

AI surge drives record chip profits

The performances represented Samsung’s best since early 2022, and suggested that its chip division was rebounding strongly from a two-year industry downturn.

Now, the recovery in memory chip pricing and global AI development is causing profits to leap. Average DRAM prices increased by roughly 172% year-over-year in the third quarter, and NAND flash memory also posted double-digit growth, according to TrendForce. These chips are crucial for the AI servers that underpin large language models, such as ChatGPT and Gemini, as well as data centers operated by tech giants like Google, Amazon, and Microsoft.

Samsung has been scrambling to narrow the gap behind its smaller competitor, SK Hynix, which currently dominates the market for high-bandwidth memory (HBM) chips used in AI accelerators. Most of Nvidia’s HBM3E chips, which are crucial for training and running AI models, are provided by SK Hynix.

But Samsung is quickly gaining ground. It recently received certification from Nvidia for its 12-layer HBM3E chips and secured an order from AMD, enabling it to tap into the fast-growing AI server market. The certification will enable Samsung to initiate mass shipments within the next few months, positioning it to compete head-to-head with SK Hynix and Micron, according to people familiar with the industry.

Investors bet big on Samsung’s future in AI.

The strong quarter has helped lift investor confidence that Samsung is on track to regain leadership in the semiconductor industry. Its shares have surged more than 60% since the beginning of June, driven by hopes for AI demand and a recovery in memory prices.

Both Samsung and SK Hynix recently signed deals to provide chips for OpenAI’s “Stargate” project, an ambitious initiative to construct one of the world’s largest AI data centers. Stargate’s estimated demand could potentially consume 40% of global DRAM production, underscoring the significant demand for processing power from AI.

Park Jae-kyung, an analyst at Daishin Securities, said Samsung’s profit surge marked a watershed moment, noting that the company was not only recovering but also re-emerging at the forefront of the AI revolution.

In memory as well as beyond, Samsung’s display and mobile divisions performed well. But premium smartphone panel earnings benefited from robust sales of foldable devices and OLED panels. The company’s Galaxy Z Fold6 and Flip6 models had helped prop up the mobile income line, contributing to a less lopsided growth picture among divisions.

Analysts predict that Samsung’s semiconductor profit will surge through 2025, driven by faster-than-anticipated global demand for AI servers. The company informed investors on its most recent earnings call in July that it anticipated strong growth in high-end memory products for servers in the second half of the year.

Still, risks remain. Samsung faces challenges related to geopolitical tensions, export controls, and supply chain disruptions — especially after the United States recently tightened restrictions on exporting chip technology to China. The company has also been under pressure to improve its profitability in the foundry business, where it trails its Taiwanese rival, TSMC.

Analysts from Morgan Stanley, Citi, and Goldman Sachs have all updated their Samsung share price forecasts in the past week to reflect high, continued memory prices and better chip yields.

 According to Bloomberg Intelligence analyst Masahiro Wakasugi, Samsung has returned to the game, describing the nexus of AI-driven demand, squeezed supply, and improved technology across its products — as well as high interest rates — as having created a “double whammy” for profitability.

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