AI storage chip demand ignores the war clouds, Samsung's Q1 profit soars eight times higher than expected!

Samsung Electronics (Samsung Electronics Co.) achieved a quarterly profit that far exceeded expectations, showing an eight-fold increase, highlighting that amid market volatility triggered by the Middle East conflict, demand for AI storage chips remains strong. Customers, led by cloud service providers, are increasing orders for high-bandwidth memory (HBM) and other chips for data centers to support artificial intelligence services, driving both shipment volume and profit margins for this giant in chips and smartphones. In early trading on Tuesday in Seoul, Samsung's stock price rose 4.9%, after falling from its peak in February. This increase somewhat alleviated concerns in the market about the sustainability of high energy-consuming AI hardware spending due to the US-Iran conflict. Competitor SK Hynix Inc.'s stock price also rose 5.3%. Samsung announced that its preliminary operating profit for the first quarter of March reached 57.2 trillion Korean won (about 37.9 billion US dollars), skyrocketing by 755% year-on-year, reaching a historical high, while analysts' average expectation was 39.3 trillion Korean won. Revenue climbed to 133 trillion Korean won, exceeding the market's average expectation of 116.8 trillion Korean won. The company will release a complete financial report including net profit and departmental performance on April 30. Sanjeev Rana, head of research at CLSA Securities Korea, said, "All of this is driven by memory chips, and the performance is stronger than the market expected." He estimates that memory chips may contribute close to 90% of total operating profit. He stated that supply of HBM and traditional DRAM products is "very tight." As South Korea's largest company, Samsung, together with SK Hynix and Micron Technology, Inc., collectively dominate the global memory supply. In recent years, these three manufacturers have increasingly shifted their capacity towards HBM for NVIDIA Corporation's AI accelerators, tightening traditional memory supply. Samsung's operating profit in the first quarter far exceeded its performance in other quarters and surpassed the company's total annual profit of 43.6 trillion Korean won for 2025. Government data shows that South Korea's semiconductor exports in March, a leading indicator of global tech demand, surged by 151.4% year-on-year to a record-breaking $32.8 billion. Morgan Stanley analysts Shawn Kim, Ryan Kim, Duan Liu, and Cindy Huang wrote in a report, "Samsung is in a period of strong profit recovery. Once we adapt to profit growth in an unprecedented period of capacity constraints, the upside potential will be substantial." Analysts remain optimistic about this South Korean giant, generally not worried about AI optimization threats from products like Alphabet Inc. Class C TurboQuant or Anthropic Claude Mythos. Andrew Jackson, head of Japan stock strategy at Ortus Advisors, said, "This is rapidly becoming a 'whatever-Turbo' situation, with investors turning a blind eye to the threat of Alphabet Inc. Class C's compression technology." In a report on April 2, Citigroup analysts Peter Lee and Jayden Oh wrote that global DRAM average selling prices surged by 64% in the first quarter of this year compared to the previous quarter. Citigroup expects Samsung's full-year operating profit in 2026 to reach 310 trillion Korean won (about 206 billion US dollars), and they stated that they expect strong AI inference demand to support prices. Earlier this year, Samsung became the first company globally to commercially ship next-generation HBM4 to customers. In the previous years, Samsung faced delays in certification, allowing competitor SK Hynix to dominate this high-profit area. Samsung's stock price rose by over 120% last year, but lagged behind SK Hynix's increase of over 270%. Samsung showcased its cutting-edge HBM4E chips at NVIDIA Corporation's GTC conference last month. NVIDIA Corporation CEO Jensen Huang mentioned at the conference that Samsung's advanced 4-nanometer technology will be used to manufacture the Groq 3 processor. Additionally, Samsung has also signed agreements to supply HBM4 chips to AMD.