Samsung likely to flag 160% jump in Q4 profit as AI boom stokes chip prices

The Power of Samsung AI Boom Stokes Chip Prices to 160% Jump in Q4 Profit

The rapid rise of artificial intelligence (AI) has sent shockwaves through the semiconductor industry, driving up memory prices and propelling Samsung Electronics' fourth-quarter operating profit to an impressive 160% increase. According to a report from LSEG SmartEstimate, Samsung is expected to announce an operating profit of 16.9 trillion won ($11.7 billion) for the October to December period.

This remarkable surge in profitability stems from the industry's shift towards AI-related chips, which has curbed production for traditional memory while demand surges for both conventional and advanced chips needed to train and run AI models. As a result, semiconductor prices have skyrocketed in recent months, with some analysts predicting an operating profit of over 20 trillion won.

Samsung's Performance A Dramatic Turnaround

Samsung's booming profit marks a significant turnaround from just over a year ago, when the company trailed its cross-town rival SK Hynix in supplying high-end chips to Nvidia, the dominant maker of AI processors. Since then, Samsung shares have jumped 125 percent, marking their biggest annual percentage gain in 26 years.

The company's mobile business has been particularly affected by the chip price rally, with soaring prices squeezing margins and posing risks of a demand slowdown for PCs and smartphones. However, analysts believe that Samsung's mainstay semiconductor business will continue to drive its performance, with operating profit expected to more than double this year to over 200 trillion won.

The Power of AI A Driver of Growth

The rapid adoption of AI technology has been a major driver of the chip price surge, as companies scramble to meet booming demand for AI-related chips. According to TrendForce, prices for DDR5 DRAM chips have jumped 314 percent in the fourth quarter from a year earlier. This trend is expected to continue, with conventional DRAM contract prices predicted to rise 55 percent to 60 percent in the current quarter.

As companies like Micron Technology forecast second-quarter adjusted profit at nearly double Wall Street estimates, it's clear that the AI boom is having a profound impact on the semiconductor industry. With the likes of Nvidia CEO Jensen Huang announcing that the company's next generation of chips is now in full production, it's likely that this trend will continue to drive growth and innovation in the sector.

Challenges Ahead A Demand Slowdown Risk

While the chip price rally has been a boon for Samsung's mainstay semiconductor business, analysts are warning about the potential risks of a demand slowdown as the global shortage of memory chips begins to ease. As Lee Min-hee, an analyst at BNK Investment & Securities, notes, Risks of a demand slowdown may arise as AI data centers increasingly rely on debt to finance investments.

Conclusion Samsung's Position in the AI Revolution

The power of Samsung lies in its ability to adapt and thrive in the rapidly evolving landscape of the semiconductor industry. As AI technology continues to drive growth and innovation, it's clear that companies like Samsung will be at the forefront of this revolution. With a predicted 160% jump in Q4 operating profit, it's evident that Samsung is well-positioned to capitalize on the trends shaping the future of the tech industry.

Keywords AI, chip prices, semiconductor industry, Samsung Electronics, Q4 profit, DDR5 DRAM chips, TrendForce, Micron Technology, Nvidia.

Edward Lance Arellano Lorilla

CEO / Co-Founder

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