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Samsung Electronics Faces 39% Drop in Q2 Profit Amid Weak AI Chip Sales

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Samsung Electronics is expected to report a 39% decline in its second-quarter operating profit, largely due to delays in supplying advanced memory chips to AI chip leader Nvidia, industry analysts said. The South Korean tech giant is forecast to announce an operating profit of 6.3 trillion won ($4.62 billion) for April to June, marking its lowest earnings in six quarters, according to LSEG SmartEStimate.

This downturn has raised concerns about Samsung’s ability to compete with rivals like SK Hynix and Micron in the rapidly growing market for high-bandwidth memory (HBM) chips used in artificial intelligence data centers. While its competitors have seen strong demand, Samsung’s growth has been limited by its heavy reliance on the China market, where U.S. export restrictions have curbed sales of advanced chips.

Analysts point out that Samsung’s latest HBM chips, specifically the HBM3E 12-high version, have not yet received Nvidia’s certification, slowing supply to the U.S. AI chip leader. Ryu Young-ho, senior analyst at NH Investment & Securities, noted that Samsung’s shipments to Nvidia are unlikely to be significant in 2025. Samsung has, however, started supplying the new chip to AMD since June.

Despite challenges in the chip segment, Samsung’s smartphone sales remain steady, supported by stockpiling ahead of potential U.S. tariffs on imported devices. Nonetheless, ongoing U.S. trade policies, including proposed tariffs on non-U.S.-made smartphones and possible restrictions on technology exports to Samsung’s Chinese plants, continue to create business uncertainty.

Samsung’s shares have underperformed this year compared to the KOSPI index, rising about 19% against the KOSPI’s 27.3% increase. As of Monday, Samsung shares dipped 1.9%, while the KOSPI rose 0.3%.

US-South Korea Trade Talks Focus on Big Tech Regulation, Agriculture, and Strategic Cooperation

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The United States and South Korea continue negotiations aimed at resolving trade issues, including tariffs, digital services regulation, agriculture, and strategic investments. South Korea is seeking to extend a 90-day pause on 25% U.S. tariffs set to expire on July 9 as talks progress.

Key Issues in the Negotiations:

1. Digital Services and Big Tech Regulation

  • South Korea is advancing legislative proposals to regulate major tech companies like Google, Apple, Facebook, and local firms Naver and Kakao, aiming to curb market dominance and protect smaller businesses.

  • U.S. lawmakers have expressed concern that South Korea’s laws mirror the EU’s Digital Markets Act and unfairly target American tech firms while exempting Chinese giants such as ByteDance and Alibaba.

  • The ruling Democratic Party in South Korea is reportedly slowing down antitrust legislation to balance trade sensitivities.

2. Content Providers and Data Restrictions

  • South Korea requires content providers like Netflix to pay network usage fees.

  • Restrictions on exporting location-based data by Google and other providers are a sticking point, linked to national security concerns related to North Korea.

  • South Korea plans to rule on Google’s renewed request to use detailed mapping data outside the country by August 11.

3. Agriculture Access and Market Sensitivities

  • The U.S. seeks greater access to South Korea’s agriculture sector, particularly beef, apples, and potatoes.

  • South Korea restricts imports of beef from animals older than 30 months over mad cow disease concerns.

  • Although tariffs on beef will drop to zero by 2026 under a 2007 pact, farmers remain concerned about further market liberalization.

  • South Korea’s heavy tariff on rice imports (over 500%) has not been raised recently in talks.

4. Defense Costs and Foreign Exchange Policies

  • Discussions on foreign exchange policy and cost-sharing for approximately 28,500 U.S. troops stationed in South Korea are ongoing but handled separately from trade talks.

5. Industrial Cooperation and Investments

  • Both sides emphasize industrial cooperation, particularly in shipbuilding, as a way to revitalize U.S. manufacturing and reduce trade deficits.

  • South Korea is noted as a leader in AI, semiconductors, chips, batteries, and automotive industries.

6. Alaska LNG Project

  • South Korea is cautiously considering energy purchases linked to the $44 billion Alaska LNG project, awaiting more technical details from the U.S. later this year.

Nvidia Briefly Hits Historic $3.92 Trillion Market Value Amid AI Boom

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Nvidia (NVDA.O) briefly surged to a market capitalization of $3.92 trillion on Thursday, putting it on track to become the most valuable company ever, fueled by Wall Street’s strong optimism around artificial intelligence (AI).

Key Highlights

  • Nvidia’s shares rose as much as 2.4% to $160.98, surpassing Apple’s record closing market cap of $3.915 trillion set on December 26, 2024.

  • At the time of the latest update, shares were up 1.5% at $159.60, with a market cap just under Apple’s record, at $3.89 trillion.

  • Nvidia’s AI-focused chips are in high demand for training large AI models, driving significant growth for the Santa Clara-based company.

Market Context

  • Microsoft holds the second spot in market value at $3.7 trillion, with shares rising 1.7% to $499.56.

  • Apple sits third with a market cap of $3.19 trillion after a 0.8% increase.

  • Other tech giants racing to build AI data centers and dominate AI include Amazon, Meta, Alphabet, and Tesla, all fueling demand for Nvidia’s high-end processors.

Industry and Stock Insights

  • Joe Saluzzi, co-manager at Themis Trading, remarked on the incredible scale of market valuations, noting the AI-driven surge pushing companies into multi-trillion-dollar territory.

  • Nvidia’s valuation has nearly octupled in four years, from $500 billion in 2021 to almost $4 trillion.

  • The company’s value now exceeds the combined stock markets of Canada and Mexico and all publicly listed companies in the UK.

  • Nvidia trades at about 32 times analysts’ forward earnings—below its five-year average of 41—reflecting growing earnings estimates outpacing stock gains.

  • The stock has rebounded over 68% since early April lows caused by trade uncertainty.

Broader Impact

  • Nvidia’s growth underscores Wall Street’s massive bets on generative AI technologies, as its hardware forms the backbone of many AI systems.

  • Nvidia now makes up 7% of the S&P 500 index; combined with Microsoft, Apple, Amazon, and Alphabet, these five tech giants constitute 28% of the index.

  • Despite optimism, some experts like Kim Forrest of Bokeh Capital Partners caution that current AI models might not fully live up to the hype.

Company Background

  • Founded in 1993 by CEO Jensen Huang, Nvidia evolved from a niche graphics chipmaker to a leading AI technology company.

  • The company replaced Intel on the Dow Jones Industrial Average last November, marking a significant industry shift toward AI-focused semiconductor development.