Samsung: Profit falls but investors look Nvidia partnership
Samsung Electronics flagged weaker-than-expected profit for its final quarter of 2024, yet optimism around future high-performance memory sales boosted its stock by 3.4 per cent on Wednesday.
In this morning’s report, the company attributed this miss to memory chip prices, soft smartphone demand, and heaving R&D spending.
Samsung’s efforts to remain relevant in the AI push have been bolstered by Nvidia’s chief executive, who remains optimistic about the company’s outlook.
Samsung’s earnings fall short
According to a regulatory filing, the South Korean chip giant reported a preliminary operating profit of 6.50 trillion won (£3.6bn) for the October to December period.
While this figure was more than double the number reported for the same period last year, it was 29.2 per cent lower quarter on quarter and missed market expectations of 7.97 trillion won (£4.7bn).
Sales reached 75 trillion won (£46.4bn), up to 10.7 per cent year-on-year but 5.3 per cent lower than the prior quarter.
Samsung attributed the drop to weak demand for conventional memory chips used in PCs and mobile devices and stagnating smartphone sales amid increased competition.
Key drivers
Despite record-high memory sales, driven by brisk demand for high-performance products, the company’s profits were offset by hefty R&D investments and expanded production capacity.
Samsung also reported a fall in utilisation rates for non-memory chips as demand softened across mobile devices and other sectors.
Mobile sales remained stagnant without significant new smartphone models in the fourth quarter, further pressuring earnings.
Yet, for 2024, Samsung’s operating profit nearly quintupled to 32.73 trillion won(£19.57bn), supported by a strong performance in early quarters.
Annual sales rose 16.9 per cent to 300.08 trillion won (£183.05bn), showcasing the company’s long-term growth.
HBM chip optimism
Despite disappointing quarterly results, investor optimism was buoyed by remarks from Nvidia chief executive Jensen Huang at the CES tech conference in Las Vegas on Tuesday.
Huang hinted that Samsung’s high-bandwidth memory (HBE) chips, currently undergoing Nvidia’s qualification test, were close to approval.
“I have confidence that Samsung will succeed with HBM” he said, “like tomorrow is Wednesday”.
The potential deal with Nvidia, the world’s most valuable AI chip maker, could open lucrative new markets for Samsung.
Analysts expect Samsung’s high performance memory to play a critical role in AI-related growth in 2025, yet the company remains under pressure.
AJ Bell analyst commented: “AI matters for Samsung because demand for traditional chips used in personal computers and smartphones is under pressure.”
“The launch of a new flagship phone later this month could be key for the company”, they added.