Samsung Electronics released its preliminary earnings guidance for the second quarter on the 7th. The report indicates that, boosted by the continued surge in demand for artificial intelligence (AI) chips, the company's operating profit for Q2 is expected to surge nearly 19-fold year-on-year. However, these impressive figures failed to ease capital market concerns about a peak in AI investment and potential overcapacity. As a result, Samsung Electronics' stock price plummeted nearly 10% on the day, triggering significant volatility in the South Korean financial markets.
According to Samsung's preliminary data, the company's Q2 operating profit is projected to reach 8.94 trillion won (approximately $5.87 billion), marking a third consecutive quarter of record-breaking performance and significantly exceeding the general expectations of Wall Street analysts. Concurrently, Q2 sales are expected to double to 171 trillion won. Industry analysis points out that the explosive profit growth at Samsung Electronics is primarily driven by robust demand from global tech companies for high-performance, customized memory chips used in training and running large AI models.
Despite the exceptionally strong fundamental performance, the capital market reacted with indifference, quickly triggering profit-taking. At Tuesday's close, the stock price of Samsung Electronics, a heavyweight in the South Korean market, plunged nearly 10%, directly dragging the benchmark Korea Composite Stock Price Index (Kospi) down by over 8%. At the same time, its main competitor and another memory chip giant, SK Hynix, suffered an even more severe hit, with its stock price falling over 11%.
Addressing the market's anomalous "sell the news" reaction, Saxo Bank's Chief Investment Strategist Charu Chanana noted that while the industry cycle for high-performance memory chips remains strong, the market has begun to question whether the most explosive "golden profit period" for this sector has peaked. Chanana emphasized that after the previous period of rapid growth, investors are now looking beyond the current strong sales data and focusing more on whether companies possess sustainable pricing power for the future. The core market concern is whether the current chip shortage, caused by supply failing to meet demand, could evolve into a severe overcapacity problem in the future following aggressive expansion by major manufacturers.
Industry experts point out that this phenomenon indicates the global AI sector is now facing risks of becoming overcrowded and experiencing diminishing marginal returns. James Thorne, Chief Market Strategist at Wellington-Altus, emphasized that this is the inevitable outcome as a supply-constrained market cycle matures. The market has already priced in a "perfect expectation," making it difficult for even flawless corporate fundamentals and earnings data to provide further positive stimulus to investors.
Thorne further analyzed that this does not signify the end of the AI industry chain, but the era of "easy profits" in this field is over. It is anticipated that in the next phase of global AI infrastructure development, market capital and resources will gradually shift and tilt towards more cost-effective supporting resource sectors such as power supply, grid upgrades, cooling technology, and physical infrastructure.
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