Samsung Electronics expects profits to plummet by 56% in the second quarter due to weak sales of artificial intelligence (AI) chips, mainly because it is difficult to meet NVIDIA's demand.

Samsung expects that the second quarter (as of the end of June) will have an operating interest of about 4.6 MKR, far below the 10.44 MKR in the same period last year. This number is also lower than the expected 6.26 megawatt circle of the financial data organization LSEG. In addition, Samsung expects to earn 74 MKR in the second quarter, which is also lower than LSEG's expected 75.55 MKR in the second quarter.

Following the release of financial forecasts, Samsung's stock price fell 1.13% this morning, showing a staggering trend.

Samsung pointed out that the impact of inventory value adjustment and the impact of the US export restrictions on China's high-level AI chips is one of the main reasons for the decline in profits. In addition, Samsung has gradually fallen behind its rivals SK Hynix and Micron in high-frequency broad memory (HBM).

Counterpoint Research Research Director MS Hwang pointed out that Samsung's disappointing financial report was mainly due to the continuous damage to OEM business, while the high-gross profit HBM business has not provided effective support this quarter.

Currently, the HBM market is led by SK Hynix, and the company has become the main supplier of NVIDIA. Despite reports that Samsung is working to pass the certification of the latest version of HBM chips, Korean media claims that the project will be postponed to at least September.

NH Investment & Securities In-depth analyst Ryu Young-ho believes that Samsung's key problem is still to restore competition, and everything ends up returning to HBM. "Due to the fierce competition, it is difficult to raise prices immediately, and it is also difficult to maintain high interest rates."

Samsung refused to respond to the progress of cooperation with NVIDIA, but said the new version of HBM chips are being tested and shipped.

Ray Wang, president of the research on semiconductors, supply chains and new technology at Futurum Group, pointed out that it is clear that Samsung has not yet passed NVIDIA's certification of the first-hand HBM. Considering that NVIDIA accounts for about 70% of global HBM demand, this delay will significantly suppress Samsung's growth power in the short term.

Ray Wang believes that although Samsung has obtained some AMD HBM orders, these orders are unlikely to be reflected in the second quarter financial report due to production schedules.

Samsung crystalline OEM business is also facing weak orders and fierce competition from TEK. According to Reuters, Samsung has directed 30% of its departments in parts of its global subsidiaries. At the same time, the U.S. taxes have also cast a shadow on Samsung's chip and mobile phone business prospects, and also put pressure on gross profit margins.

Samsung stock prices are still up more than 16% this year, with the expected release of the full second quarter financial report later this month.

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