Is Samsung Poised for Significant Growth as the AI Chip Market Surges?

Samsung Electronics Co Ltd (OTC:SSNLF) will announce its first-quarter earnings this month, and investors should eagerly anticipate the results. The South Korean tech giant expects its operating profit to grow tenfold compared to the previous year’s first quarter, reaching 6.6 trillion won ($4.9 billion).

The company still needs to explain fully why this is the case, which it will likely do at the next earnings call.

Still, many suspect high-bandwidth memory (HBM) chips and their increasing demand for creating chips used in artificial intelligence development to be a major catalyst behind the reported surge in operating profit.

Samsung Says First-Quarter Earnings Grew by 10x

Surpassing Bloomberg estimates, Samsung’s operating profit is expected to have grown significantly, reaching 6.6 trillion won. The company’s consolidated sales are also projected to have risen to 71 trillion won from 63.75 trillion won last year.

The impressive earnings growth is likely attributed to more robust demand for Samsung’s smartphones and other devices, notably after the company incorporated artificial intelligence across most of its product lineup.

Additionally, Samsung’s memory chip business is expected to have benefited from increased demand from the AI industry, especially for high-bandwidth memory (HBM) chips, which are crucial for running AI programs. Nvidia (NASDAQ:NVDA) chose Samsung to begin manufacturing advanced HBM chips for its processors.

Samsung Likely to Receive Billions in US Chips Act Funding with Investment in Texas

To further solidify its position in the semiconductor industry, Samsung plans to more than double its investment in Texas to roughly $44 billion.

The investment will focus on expanding the semiconductor hub in Taylor, Texas, near Austin. It will include a new chip-making factory and a facility for advanced packaging, research, and development. The second Taylor-based chip factory alone is expected to cost more than $20 billion.

To support this expansion, Samsung is expected to receive billions of dollars in subsidies from the U.S. Chips Act. Discussions with the Commerce Department are ongoing. An event to announce Samsung’s broadened investments is slated for April 15 in Taylor.

Why the Increased Demand for HBM Chips?

The significance of HBM chips in the era of artificial intelligence cannot be overstated.

These chips are critical for AI computing as they can speed up computing times by stacking multiple DRAM memories on top of each other and merging them as one. HBM is the preferred memory type to work alongside graphic-unit processors, like those made by Nvidia, that power AI computing, enabling faster data-processing speeds.

Major chip makers, including TSMC, Samsung, and Intel (NASDAQ:INTC), are investing heavily in 2.5-D and next-generation 3-D packaging for these chips. Samsung’s planned facility for advanced packaging, with a projected cost of roughly $4 billion, is a critical final step in producing high-end AI chips like those made by Nvidia.

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Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

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