--- title: "Samsung's operating profit surged 18 times, but its stock price plummeted, raising market concerns about a shift in the AI chip cycle" type: "News" locale: "en" url: "https://longbridge.com/en/news/291880500.md" description: "Samsung Electronics released its performance guidance for the second quarter of 2026, expecting an operating profit to surge 1810% year-on-year to KRW 89.4 trillion, exceeding expectations. However, the market reacted lukewarmly, with the stock price plummeting 10%. SK Hynix and the semiconductor sector in Japan and South Korea also saw significant declines, triggering a circuit breaker for the KOSPI index. Analysts believe the drop is due to market overexposure to high profit expectations and subsequent cost concerns" datetime: "2026-07-07T05:09:10.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/291880500.md) - [en](https://longbridge.com/en/news/291880500.md) - [zh-HK](https://longbridge.com/zh-HK/news/291880500.md) --- # Samsung's operating profit surged 18 times, but its stock price plummeted, raising market concerns about a shift in the AI chip cycle > Interface News Reporter | Song Jianan On July 7, Samsung Electronics officially released its performance guidance for the second quarter of 2026. The sales for this quarter are expected to reach approximately 171 trillion won (about 112.34 billion USD), a significant year-on-year increase of 129%, compared to 74.57 trillion won in the same period last year; operating profit is expected to reach about 89.4 trillion won (approximately 58.8 billion USD), a staggering increase of 84.72 trillion won compared to 4.68 trillion won in the same period last year, with a year-on-year growth rate of 1810%. The performance guidance provided by Samsung exceeded market expectations. Previously, the SmartEstimate model under the London Stock Exchange Group (LSEG) aggregated predictions from 30 institutional analysts, forecasting that Samsung's operating profit for the second quarter would reach 86 trillion won, marking the third consecutive quarter of setting a historical record for corporate operating profit. The head of Samsung Electronics' semiconductor business strategy expressed optimism at a related meeting on July 3, stating that "this year's operating profit will exceed the cumulative profit of the semiconductor business over the past 40 years." However, this impressive report staged a real-life "buy the expectation, sell the fact" scenario in the secondary market. After the Korean stock market opened, Samsung Electronics' stock price plummeted, dropping as much as 10% during the session. Samsung's old rival, SK Hynix, which leads in the high bandwidth memory (HBM) sector, also faced a severe blow today, with its stock price dropping as much as 8% and exceeding a 10% decline during certain trading periods. As a result, the Korea Composite Stock Price Index (KOSPI) fell sharply by 8%. As of the time of publication, the Korea Exchange activated the KOSPI index circuit breaker, halting trading for 20 minutes. In the Japanese stock market, the semiconductor sector also did not escape unscathed. The stock price of Kioxia, a major memory manufacturer in Japan, plummeted by 10.86%, while chip testing equipment giants Advantest and Tokyo Electron fell by 0.64% and 1.85%, respectively, putting pressure on the Nikkei index overall. Analysts attributed the decline in Samsung's stock price to the market's overly high expectations for profits. Even with the record-high memory chip prices stimulating profits, and despite Samsung allocating funds to pay substantial bonuses to semiconductor workers in accordance with the wage agreement reached in May (which links employee salaries to operating profits), its profits still saw significant growth. Some analysts indicated that without these reserves, its operating profit could have easily exceeded 100 trillion won. However, Albert Yong, managing partner at Petra Capital Management, pointed out that "Samsung's strong earnings have long been reflected in the market's broad expectations and were fully manifested in the previous surge in stock prices. Now, investors are starting to look further ahead, and their real concern is the sustainability of this AI frenzy, as well as whether American tech giants will slow down their capital expenditures on AI infrastructure." Despite the current tight supply and demand fundamentals in the memory market, a common concern among investors is the sharp increase in the proportion of capital expenditure by cloud service providers allocated to AI storage chips—expected to reach 52% this year and forecasted to exceed 70% next year. Is this extreme expenditure structure truly sustainable? If the commercialization pace of AI services does not keep up with the expansion of hardware, this performance frenzy driven by computing power may face a correction at any time. The current storage chip industry is in an unprecedented golden era. The irrational demand for high-bandwidth memory driven by AI is squeezing the production capacity of traditional memory in all aspects. Major giants are prioritizing the higher-margin data center demand by shifting wafer production capacity towards advanced memory, directly leading to a global shortage of traditional standard DRAM and NAND flash. According to industry monitoring data from Citigroup Research, in the second quarter of this year, the average selling prices of global DRAM and NAND surged by 44% and 53% respectively compared to the previous quarter. Furthermore, data released by market research firm Counterpoint indicates that this extreme "shortage dividend" has granted Samsung, SK Hynix, and Micron strong pricing power, with the average operating profit margin of these three chip giants soaring to an unimaginable 75% to 80% in that quarter. However, the flip side of the coin is that the insane profits in the upstream storage chip sector are increasing the costs for downstream consumer businesses. As the world's largest smartphone manufacturer, Samsung's mobile business is under pressure from rising chip prices. Although Samsung and Apple have recently raised the prices of some hardware products, the soaring component costs far exceed the extent of terminal price increases. Analysts generally expect that Samsung may have to initiate another round of comprehensive price increases for smartphones in the second half of this year. Notably, Samsung and SK Hynix have recently jointly committed to invest up to 320 trillion Korean won (approximately USD 207 billion) to significantly expand chip production capacity in South Korea. Samsung plans to implement this massive investment in phases between 2026 and 2040. The storage chip industry itself has cyclical development patterns. When memory prices soar, companies typically invest heavily in building wafer fabs, which take 2.5 to 3 years from construction to full production. The capital expenditure currently being concentrated by Samsung and SK Hynix will create a massive new supply between 2028 and 2029. Once the capital expenditure growth of AI cloud vendors slows down, the supply-demand pattern will quickly reverse, and long-term price downward pressure cannot be ignored. However, some institutions hold an optimistic view. The team of Bank of America Securities analyst Simon Woo stated in the latest Global Storage Technology Weekly that the construction of factories in Korea will not end the storage super cycle and will not significantly affect the supply-demand pattern for a considerable period. 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