Samsung SDI Co., a major South Korean electric vehicle battery manufacturer, reported a narrower-than-expected first-quarter operating loss, extending a recent sharp stock rally fueled by surging energy storage demand driven by the AI infrastructure boom. Strong demand prospects for energy storage systems in North America, Asia, and Europe, coupled with relatively optimistic electric vehicle demand in Europe, have helped buffer the negative impact of significantly reduced policy support for EVs in the United States.
The company announced on Tuesday that its operating loss for the quarter ending March 31 narrowed significantly by 61% to 155.6 billion won (approximately $106 million). This loss figure was notably better than the average analyst estimate of a 270.7 billion won loss. Overall, the company's improved performance was supported by energy storage demand from AI data centers, tax credits for advanced ESS manufacturing, high-margin cylindrical batteries, and its electronic materials business.
Samsung SDI's shares rose as much as 7% in morning trading on the Seoul exchange, bringing its year-to-date gain to 146%. This rally has been driven by the company's large-scale pivot towards major energy storage systems for hyperscale AI data centers, such as those dubbed "Stargate," and a recent agreement to supply high-nickel NCM batteries to Mercedes-Benz Group AG. These EV batteries will be used in the German luxury automaker's next-generation compact and mid-size electric SUVs and certain coupe models.
As illustrated in the accompanying chart, Samsung SDI's stock has more than doubled this year, propelled higher by the battery maker's better-than-expected quarterly loss.
In terms of other key financial results, Samsung SDI reported that total first-quarter revenue increased by 12.6% year-over-year to 3.6 trillion won. The net profit metric turned positive from a previous net loss, primarily driven by exceptionally strong energy storage system demand and a significant increase in sales of high-margin cylindrical batteries. The company also benefited from U.S. advanced manufacturing tax credits related to ESS production, with a preliminary estimated amount reaching as high as 80.5 billion won. Concurrently, resilient semiconductor demand helped boost its relatively smaller electronic materials growth business.
The confidence in robust demand for energy storage systems is strengthening, fueled by unprecedented power resource demands from the AI boom, government policy incentives, improved economic expectations, and electric vehicle expansion plans in Asian countries. When discussing "battery energy storage," lithium batteries are chosen for the vast majority of new storage projects globally, firmly establishing lithium as the primary beneficiary of this technological trend. A recent IEA report indicates that lithium-ion batteries dominate nearly all electric vehicles and new energy storage projects. The U.S. Solar Energy Industries Association states that lithium batteries are the main form of storage paired with renewables currently, with global demand for lithium battery storage expected to experience explosive growth over the next decade.
Lithium battery storage typically boasts round-trip efficiency above 85%–90% and extremely fast, millisecond-level response times for charging and discharging, making it particularly suitable for peak shaving, frequency regulation, and backup power. While technologies like flow batteries, sodium-ion, and compressed air have potential in certain long-duration storage niches, their scale, cost, and capital market acceptance lag far behind lithium, making it difficult to challenge lithium's dominance in the short to medium term.
As the global expansion or construction of AI data centers, led by Microsoft, Alphabet, and Amazon, accelerates, the massive power demands of these facilities are making the lithium industry a major beneficiary of the AI boom. This is primarily because, at the power system level, AI data centers massively increase electricity demand, which in turn exponentially boosts the need for energy storage and flexible power resources.
Samsung SDI's current marginal growth drivers are now heavily skewed towards ESS, rather than its long-term reliance on EV demand. The UPS/BBU/energy storage demand from AI data centers, U.S. ESS manufacturing tax credits, and high-margin cylindrical batteries collectively buffer the pressures from weakening U.S. EV subsidies and a global slowdown in electric vehicle demand. Meanwhile, Samsung SDI's recent securing of a multi-year high-nickel NCM battery order from Mercedes-Benz indicates that demand for premium EVs in Europe persists; Mercedes will use these batteries in future compact and mid-size electric SUVs and coupes.
Samsung SDI's CFO, Kim Yoon Tae, stated on an earnings call that the global energy storage boom and the ongoing rebound in European EV demand should help continue to narrow the operating loss in the second quarter, with the possibility of achieving a quarterly profit in the second half of the year. Cho Yong-hui, Executive Vice President of the ESS business, mentioned that in the ESS sector, the company has secured large-scale orders for the next two to three years as it expands its customer base from traditional utility companies and data center operators to include microgrid suppliers.
A recent report from UBS Group AG indicates that battery energy storage systems are becoming the "second major growth engine" for lithium demand, with importance comparable to that of electric vehicles. UBS forecasts that by 2030, energy storage demand will account for nearly 45% of total battery demand, elevating its status from a "marginal variable" to a "core variable."
The relentless surge in power demand, driven by the rapid construction and expansion of global AI data centers led by Alphabet, Microsoft, and Meta, underscores the critical importance of power resource supply, fueling the popular investment theme that "the ultimate requirement for AI is electricity." More significantly, if the "self-power" path pursued by tech giants becomes institutionalized across the U.S. and other regions like Europe, it would systematically shift a substantial portion of AI capital expenditures towards energy storage, power equipment, and grid technology stacks.
In mid-April, a recent forecast revealed that major U.S. utility companies plan to add approximately $1.4 trillion in cumulative capital expenditures over the next five years to massively upgrade aging grid systems and provide robust power expansion resources for the unprecedented AI data center construction cycle led by Microsoft, Alphabet, and Amazon. Around the same time, the Electric Reliability Council of Texas (ERCOT) predicted in a presentation and public statement that peak power demand could reach 367,790 megawatts in six years, a massive surge—more than quadruple—compared to the historical peak of 85,508 MW set in August 2023.
The Texas grid operator recently warned that by 2032, actual power demand, driven by the booming expansion of large AI data centers and population growth, could quadruple compared to recent record levels. This increase would require generating capacity equivalent to nearly 300 new nuclear reactors. The latest forecast reports from ERCOT and U.S. utility companies collectively highlight that the U.S. grid system is too outdated to keep pace with the massive power demands of the AI era. They also indicate that American tech giants have effectively entered an unprecedented era of "scrambling for megawatts" and "self-power," meaning the unseen frenzy of AI data center construction is accelerating the shift of the scarcest power supply links in the global data center power chain, including energy storage, towards a new super bull market.
Comments