Samsung guides to record profit on AI memory, and the market yawns

Samsung Electronics announced on Tuesday (July 7) that it expects its operating profit in the second quarter to go up to around 89.4 trillion Korean won, representing close to 19 times the profit it registered in the same quarter last year, due to the boom in the memory chips used for AI.

However, investors were not that enthusiastic about this news, with the shares of Samsung tumbling. This can be attributed to the fact that investors have started evaluating AI valuations to be too speculative.

This disconnect from the reality of the situation is relevant not only to South Korea but also beyond. Because Samsung and its South Korean rival SK Hynix produce much of the world’s advanced memory chips for AI servers. Their performance is of great interest for investors who are investing in AI-related technologies globally. Weakness in Korean memory stocks often spills over to peers such as Micron and influences broader technology and semiconductor funds.

What Samsung actually guided

Based on its initial earnings guidance, Samsung expects its cumulative sales for the second quarter to reach about 171 trillion won, within a range of 170 trillion to 172 trillion won as per the Korea International Financial Reporting Standards (K-IFRS), while the operating profit is expected to be close to 89.4 trillion won, compared to 4.68 trillion won during the second quarter of 2025 with revenues at 74.57 trillion won.

According to Reuter’s report, this earnings figure is already more than LSEG SmartEstimate, which is estimated at 87.3 trillion won and indicates the rapid growth in demand for AI-driven technology, which has heavily impacted the supply of memory chips.

As per a report from the Financial Times, Samsung’s latest guidance indicates its third consecutive quarter of record operating results driven by what was referred to as “relentless AI demand.”

High-bandwidth memory, server DRAM and NAND flash supply has failed to meet the swelling demand for memory chips due to the expansion of hyperscale cloud-oriented infrastructures in light of AI development, which has enabled manufacturers to obtain higher prices for their products.

Analysts expect the favorable pricing environment to continue because the AI supply chain remains constrained, according to Reuter’s report.

Why the market looked away

Strong earnings, however, were not enough to stop the recent selloff.

Equities in South Korea fell off the highs of the earlier week in view of the issue of pricing levels for AI stocks rather than the market fundamentals of firms. Investors seem to doubt whether high levels of investment in AI infrastructure will continue to generate the expected returns given the current valuations of the stocks.

Ryu Young-ho, a senior analyst at NH Investment & Securities said:

Investors are becoming more cautious about whether massive AI investment by big tech companies will continue at the current pace.

That is the reason for the cautious approach with Samsung which managed to provide outstanding expected results this year.

Another reason for investors staying cautious is that the expectations had become extremely high.

In addition, Reuters has cited Tom Kang, who works as the research director in Counterpoint Research, saying that: “The market was expecting even stronger results.”

This refers to the fact that although the earnings expectations during the current AI cycle have been great, sometimes a good performance is not enough for investors, as they have already adapted to almost perfect business conditions for companies.

This pessimistic mood has also gone to other parts of the region. According to Reuters, the MSCI Emerging Markets Asia Index fell slightly, with South Korea being responsible for over a quarter of the index, making the drop in Korean tech stocks much worse.

SK Hynix did not manage to escape this trend even as it is one of the biggest beneficiaries of the demand for AI memory. Investors now have their eyes on whether sustained pricing strength in HBM can offset concerns that AI-related capital expenditures may eventually moderate.

The read-across for the global AI trade

Micron share prices also faced some pressure since the market perspectives for memory chip evaluation have changed after the decline of the Korean market. That demonstrates that the investors react to global semiconductor prices because of the fact that they perceive memory producers as the measure of technology expenses connected with AI.

The reaction can be easily recognized by crypto investors and other investors of risk markets. Assets related to AI have become more expensive during the year in terms of valuation multiples as the demand for AI became bigger. However, the trend is changing since this time, investors look for profits rather than simply rewarding AI exposure.

In this regard, Samsung has produced some profits. The big question is whether recent quarterly announcements and continued evidence of robust HBM demand across the semiconductor industry will help restore trust in AI-related valuations or whether investors will continue demanding stronger proof that record profits can keep pace with record expectations.

Samsung Electronics guided to about 89.4 trillion won in second-quarter operating profit, close to 19 times a year earlier, on booming AI memory demand, yet Korean chip stocks kept falling and the Kospi reversed an early gain.

It matters to anyone exposed to the AI trade, from SK hynix and Micron to broader risk assets, because investors are now questioning AI valuations even as the numbers hit records. The next tests are Samsung’s confirmed earnings and SK hynix’s roughly $28 billion US listing.

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