The Pain of Perfect Pricing: Samsung Electronics Slumps Why Are Soaring Profits Not Good Enough?
[The pain of perfect pricing: Samsung Electronics plummets, why are soaring profits not good enough? 】As the world's largest memory manufacturer, Samsung Electronics released its preliminary second quarter performance report. Although its performance is extremely impressive, for Samsung, which has been "perfectly priced" by the market, this result still cannot meet the ultra-high expectations of investors. After the opening of the Korean stock market, Samsung's stock price fell, with its stock price falling nearly 8% during the session.
The bubble in the memory chip market appears to be bursting at an accelerated pace. After the memory sector suffered a heavy setback on Monday in the absence of clear negative catalysts, the global chip investment community is paying close attention to industry trends. As the world's largest memory manufacturer, Samsung Electronics released its preliminary second-quarter performance report. Although its performance is extremely impressive, for Samsung, which has been "perfectly priced" by the market, this result still cannot meet the ultra-high expectations of investors. After the opening of the Korean stock market, Samsung's stock price fell, with its stock price falling nearly 8% during the session. According to the preliminary second quarter financial report released by Samsung Electronics, in the three months ended June 30, Samsung initially recorded an operating profit of 89.4 trillion won, approximately 58 billion U.S. dollars, soaring 18 times year-on-year. This figure easily exceeded the median forecast of 84.2 trillion won by analysts. At the same time, Samsung's revenue in the second quarter also doubled to 171 trillion won, slightly exceeding market expectations. The industry pointed out that due to the ongoing construction of historic AI infrastructure around the world, investors have previously placed extremely high expectations on chip manufacturers such as Samsung and SK Hynix, and have pushed the profit margins of these companies to unprecedented levels. However, the market is beginning to have doubts about whether this massive wave of capital spending can be sustained. Just last week, Meta sent a cautious signal about future capital spending plans, stoking market concerns about tech giants scaling back spending and causing high-beta momentum stocks to suffer their largest two-day plunge since the outbreak. Under this cautious mood, any financial report that fails to bring enough shock has become an excuse for investors eager to make profits to cash out. High-beta momentum stocks are stocks that move more than the market and continue a short-term uptrend. Brian Cho, a portfolio manager at Causeway Capital Management, a global equity asset management institution, pointed out that the market is currently paying more attention to whether the company's annual free cash flow generation ability has ushered in a sustainable step change. In addition, management's shareholder return policy will also be the focus of attention. Currently, the shortage of memory chips has become a core bottleneck in the development of AI. Executives including Nvidia CEO Jensen Huang and OpenAI COO Brad Lightcap have previously issued relevant warnings. In order to prioritize the strong demand for data centers, major chip manufacturers have prioritized the development of high-end memory, which in turn has led to a serious shortage of traditional memory supply. Some analysts predict that this shortage will continue until at least 2027, which gives Samsung, SK Hynix and Micron tremendous pricing power. According to data from market research firm Counterpoint, the average operating profit margin of the three major chip giants in the second quarter of this year is expected to reach about 75% to 80%. However, the agency also warned in the report that some believe that such high profit margins have constituted "excessive profits." If this situation continues, memory chip manufacturers may face pressure from regulatory agencies in the future. Although they are both in the AI dividend period, Samsung Electronics' stock price performance has been worse than that of its local competitor SK Hynix. As SK Hynix's business is more focused on high-end memory that meets AI computing needs, its stock price has surged by about 260% this year; in contrast, Samsung's stock price has risen by only 165% this year after five consecutive days of decline last week. In order to quickly expand production capacity, Samsung Group and SK Group plan to build two chip manufacturing plants each in southwestern South Korea, with a total investment of up to 800 trillion won, with the goal of doubling South Korea's memory production capacity within five years. Among them, Samsung has announced plans to invest more than US$70 billion in 2026 for the expansion of production capacity and technology research and development. In addition, potential competition from the Chinese market is also worthy of attention. Korean industry experts pointed out that the technology iteration speed of Chinese DRAM manufacturer Changxin Memory has exceeded expectations and is gradually narrowing the gap with its Korean counterparts.
As Changxin Memory's share in the memory field increases, the market is observing whether it will affect the price system of the international market through scale effects in the long term. Although its actual impact is limited in the short term, for Samsung Electronics, whose valuation is already at a high level, such changes in the competitive landscape will inevitably trigger fluctuations in market sentiment. (
As Changxin Memory's share in the memory field increases, the market is observing whether it will affect the price system of the international market through scale effects in the long term. Although its actual impact is limited in the short term, for Samsung Electronics, whose valuation is already at a high level, such changes in the competitive landscape will inevitably trigger fluctuations in market sentiment. (