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Samsung’s Q4 Earnings Likely Affected by Nvidia AI Chip Supply Delay

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Samsung Electronics, the global leader in memory chip manufacturing, is expected to report a slowdown in profit growth for the fourth quarter, with challenges in meeting the soaring demand for Nvidia’s AI chips. As the world’s largest producer of memory chips, Samsung plays a crucial role in supplying the semiconductor industry. However, supply chain constraints and increasing competition for the AI chip market have hindered the company’s ability to capitalize on Nvidia’s explosive growth, leading to more conservative earnings forecasts. Analysts are now predicting that Samsung’s operating profit growth in Q4 will continue to decelerate, impacting the company’s overall financial performance.

Samsung is anticipated to estimate its operating profit for the quarter ending December at 8.2 trillion won (approximately $5.6 billion or Rs. 47,984 crore), showing a year-on-year increase from the previous year’s profit of 2.8 trillion won (roughly Rs. 16,547 crore). However, this figure still represents a significant decline from the 9.18 trillion won (roughly Rs. 54,238 crore) recorded in the third quarter of the same year. This drop reflects the company’s ongoing struggles in the memory chip sector, which has been under pressure due to global chip shortages, as well as shifting market dynamics driven by new technological trends.

The delay in Nvidia’s AI chip supply chain has had a cascading effect on Samsung, as the demand for advanced chips in the AI and data center sectors has surged. With Nvidia facing production challenges, Samsung’s memory chip sales have not been able to meet the heightened demand expected from key players like Nvidia, further impacting its revenue from this vital segment. As a result, many analysts have adjusted their forecasts for Samsung, with some now predicting that the company’s operating profit could fall below the 8 trillion won mark (approximately Rs. 47,267 crore).

Despite these challenges, Samsung continues to dominate other key markets such as smartphones and televisions. However, its reliance on semiconductor manufacturing, particularly memory chips, remains a critical pillar of its business. As the company faces short-term headwinds, it will be crucial to monitor how Samsung adapts to these challenges, particularly as the demand for AI chips and other cutting-edge technologies continues to grow. While the fourth-quarter earnings are expected to show a slowdown, Samsung’s long-term prospects will largely depend on its ability to overcome these supply constraints and regain its footing in the competitive semiconductor market.

Foxconn Posts Record Revenue for Q4, Driven by AI Demand

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Taiwan’s Foxconn (2317.TW), the world’s largest contract electronics maker, exceeded expectations by posting its highest-ever revenue for the fourth quarter, fueled by strong demand for artificial intelligence (AI) servers. Revenue surged 15.2% year-on-year, reaching T$2.13 trillion ($64.72 billion), surpassing the anticipated T$2.1 trillion, as reported by LSEG SmartEstimate. Foxconn’s cloud and networking products division saw notable growth due to AI server demand, particularly from clients like AI chipmaker Nvidia (NVDA.O).

While the smart consumer electronics segment, including iPhones, saw flat growth, December alone brought in T$654.8 billion, marking a 42.3% increase compared to the previous year. Looking ahead, Foxconn anticipates a slower performance in Q1 2025, consistent with seasonal trends but still reflecting significant year-on-year growth. The company’s shares rose 76% in 2024, outperforming Taiwan’s broader market growth of 28.5%.

 

Chipmakers Surge on Optimism Fueled by AI Demand

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Shares of chipmakers saw significant gains on Monday, driven by optimism surrounding strong AI-driven demand. Microsoft’s plan to invest $80 billion in AI-enabled data centers in fiscal 2025 sparked expectations that semiconductor demand will remain robust. Micron (MU.O) led the charge with a 10.6% rise in its stock, while other key players like Applied Materials (AMAT.O), Lam Research (LRCX.O), and KLA Corp (KLAC.O) saw increases between 5.1% and 5.5%.

The Philadelphia Semiconductor Index (.SOX) surged 3.9%, reaching its highest point since mid-October, and has risen over 19% in 2024. The broader Nasdaq (.IXIC) also advanced, leading Wall Street’s major indexes higher, while semiconductor stocks in Europe and South Korea saw similar gains.

Citigroup noted that while Microsoft’s spending plan was in line with analysts’ expectations, it was seen as a “modest positive” for the sector, alleviating concerns about a potential drop in capital expenditure.

“AI data centers are very chip hungry, that’s why you have people running towards the chip sector right now,” said Michael Matousek, head trader at U.S. Global Investors.

The strong demand for AI servers, evidenced by Foxconn’s (2317.TW) record revenue for Q4, further fueled the sector’s positive momentum. Nvidia (NVDA.O), a key Foxconn customer, added 5.1%, with CEO Jensen Huang scheduled to deliver a keynote speech at the CES trade show later in the day. AI server manufacturer Super Micro Computer (SMCI.O) saw a 10.3% surge.

Although Nvidia’s quarterly results in November pointed to a slowdown in revenue growth, the surge in demand for the company’s AI chips, which dominate the market, has mitigated those concerns.