Global Market: Samsung Electronics posts record $80.5 billion quarterly operating profit on AI chip boom

South Korea's Samsung Electronics reported record quarterly operating profit on Thursday, driven by surging demand for memory chips used in artificial intelligence infrastructure. However, its shares fell as investors questioned the sustainability of the global technology boom, AFP reported.

The world's largest memory chipmaker posted operating profit of 107.4 trillion won ($80.5 billion) for the July-September quarter, marking an increase of more than 780% from a year earlier. It was the first time a technology company had reported quarterly operating profit exceeding 100 trillion won, Samsung said.

Net profit jumped more than 510% year-on-year to 75.1 trillion won, while revenue reached 195.3 trillion won.


Also Read | Fed holds rates, says data will guide next move

According to AFP, the rapid expansion of data centres to train and run chatbots, image generators and other AI applications has boosted earnings across the semiconductor industry, despite growing concerns about excessive valuations and the sustainability of AI-related investments.

Samsung shares fell more than 5% on Thursday morning as investors reacted to the results. The semiconductor division's operating profit missed market expectations, Bloomberg News reported, tempering the positive impact of the company's record overall earnings.

Samsung said its memory business achieved another record quarter by optimising its product mix and prioritising AI-related products amid capacity constraints. Strong demand for server applications also pushed market prices higher across product categories.

Also Read | Global Market Today: Asian shares fall as Alphabet earnings miss drags Wall St futures lower

AI memory demand drives earnings boom
Demand for advanced high-bandwidth memory (HBM), which is used alongside other semiconductors in AI systems, has surged as technology companies race to expand computing infrastructure. Supply shortages have contributed to a sharp increase in memory chip prices, benefiting leading manufacturers such as Samsung and South Korean rival SK hynix.

Dilin Wu, research strategist at Pepperstone, told AFP that strong earnings from Samsung and SK hynix highlighted the strength of the AI memory boom, even as concerns persisted about the broader AI investment trade.

However, semiconductor manufacturers are benefiting directly from rising investment, while the companies purchasing their chips are still under pressure to demonstrate that their spending on AI infrastructure can generate adequate returns.

With market expectations already elevated, record earnings may not be sufficient to sustain investor enthusiasm. Market participants are increasingly focused on whether the memory chip industry's growth cycle has further room to run or is approaching peak profitability.

Samsung expects demand for memory products to remain strong. Chief Financial Officer Park Soon-cheol said the company anticipates unprecedented growth in memory demand in 2027, driven by intensifying competition to build AI infrastructure and the expansion of personal AI agents.

However, the company expects supply to remain constrained, as expanding production capacity through new facilities will take time.

The industry's focus on more profitable HBM products has also contributed to shortages of conventional memory components used in consumer electronics, potentially raising costs for products such as smartphones and laptops.

Samsung announces shareholder returns of up to 110 trillion won

Alongside its earnings announcement, Samsung detailed plans to return up to 110 trillion won to shareholders this year, including 30 trillion won in cash dividends, following an announcement made in August.

The move comes amid calls for technology companies to share more of the benefits of surging AI-related profits with investors. Samsung's shares have faced pressure since retreating from record highs in June, partly reflecting concerns about the scale and profitability of AI spending by major US technology companies.

SK hynix announced plans on Wednesday to return 60 trillion won to shareholders after completing a separate 40 trillion-won shareholder return programme.

Kim Dong-won, head of KB Securities' research centre, said expanded shareholder returns could help translate earnings growth into greater investor benefits, AFP reported.

He also argued that Samsung's record profits, alongside what he considers an undervalued share price, created an opportunity for a substantial increase in shareholder returns to address the valuation gap and potentially support a reassessment of the company's market value.

Despite the record results, Samsung's share-price decline underscores investors' focus on the sustainability of AI-driven demand, the outlook for memory chip prices and the ability of technology companies to generate returns on their substantial infrastructure investments.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)