Samsung set for highest Q3 profit in three years as AI demand lifts chip prices

Samsung Electronics is projected to report a 10% year-over-year increase in third-quarter operating profit to 10.1 trillion won, its highest since 2022, primarily driven by a recovery in conventional memory chip prices fueled by server demand and inventory rebuilding. This strong performance comes despite delays in supplying its latest HBM chips to Nvidia, which has allowed rivals to gain market share. However, recent supply deals with major customers like OpenAI and Tesla are expected to improve market sentiment and future prospects, though potential U.S. tariffs and China's export controls present lingering uncertainties.

Analysis

Samsung Electronics is projected to report a 10% year-over-year increase in third-quarter operating profit to 10.1 trillion won ($7.11 billion), its highest since 2022, according to LSEG SmartEstimate. This strong performance is primarily driven by a significant recovery in conventional memory chip pricing, with some DRAM chip prices surging 171.8% year-over-year in Q3, fueled by robust server demand and customer inventory rebuilding. Hyperscalers and AI-related investments, such as ChatGPT, are significantly boosting demand for general server memory.

Despite strong conventional memory performance, Samsung has faced challenges with delays in supplying its latest 12-layer HBM3E chips to Nvidia, allowing rivals like SK Hynix and Micron to capitalize more effectively on AI-driven demand. Micron, for instance, expects to sell out all its HBM chips for calendar year 2026 soon. Samsung's significant exposure to China, where advanced chip sales are restricted by the U.S., has also constrained its growth.

Market sentiment for Samsung's shares and chip business is anticipated to improve following recent strategic supply deals. Partnerships with OpenAI for the Stargate project and a $16.5 billion foundry deal with Tesla signal potential for increased orders and a stronger position in advanced memory and contract manufacturing. An AI chip deal between OpenAI and AMD is also expected to benefit Samsung as a major HBM customer.

However, the positive outlook is tempered by lingering uncertainties, including potential U.S. tariffs on chips and China's tightened export controls on rare earth materials. These geopolitical factors could impact Samsung's supply chain and profitability, necessitating careful monitoring despite the strong underlying demand for memory chips.

Key Decisions for Investors

• Monitor Samsung's official earnings announcement for confirmation of analyst estimates and forward guidance, particularly regarding HBM production ramp-up and customer engagements.
• Evaluate the long-term impact of recent strategic partnerships with OpenAI and Tesla on Samsung's market share in advanced memory and foundry segments.
• Assess geopolitical risks such as potential U.S. tariffs and China's export controls, which could introduce volatility despite strong underlying demand for memory chips.