Samsung’s AI chip boom: Why record profits failed to impress investors

Investors were looking for a stronger outlook for the memory-chip market and more clarity on the company’s plans to reward shareholders. Revenue for the July-September quarter rose 126.9% year-on-year to 195.3 trillion won, while net profit increased 514.6% to 75.13 trillion won. Samsung became the first global technology company to report quarterly operating profit above 100 trillion won. The surge was driven by demand for chips used in artificial intelligence (AI) infrastructure.

Technology companies are investing heavily in data centres, which require large quantities of advanced memory chips to process and store data. Samsung’s semi-conductor division generated 106.5 trillion won in operating profit, accounting for almost all of the company’s total operating profit. The results, however, did not fully satisfy investors. The profit was in line with Samsung’s earlier estimate, while its outlook for memory-chip shortages appeared less optimistic than SK Hynix’s, reported Reuters.

Investors were also expecting a fresh announcement on shareholder returns, but the company said it would provide details in January 2027. Why did Samsung shares fall despite record profits? One reason was the comparison with SK Hynix, which reported strong quarterly earnings a day earlier and offered a more bullish outlook for chip demand. The rival also announced plans to return about $75 billion to shareholders this year.

Samsung did not make a similar announcement alongside its results. Investors had expected additional share buybacks or dividends, but the company said it would finalise its next shareholder-return policy in January 2027. Reuters quoted Lee Min-hee, an analyst at BNK Investment & Securities, as saying, “SK Hynix did quite a lot more than expected yesterday . it went beyond market expectations, but Samsung Electronics hasn't really changed anything from the guidance it gave before.”

Samsung had previously said its total shareholder returns for 2026 would range between 90 trillion and 110 trillion won, including dividends and share buybacks. It paid a third-quarter dividend of 4,601 won per common and preferred share, amounting to a total payout of 30 trillion won. However, investors wanted more clarity on how the remaining amount would be distributed. Samsung said it would decide the final figure and specific plans at a board meeting scheduled for late January.

CLSA senior analyst Sanjeev Rana told Reuters that the market appeared to expect an additional buyback or dividend announcement. The decision to defer details could therefore disappoint investors in the near term. Infographic generated using AI The company’s outlook for memory-chip shortages also weighed on sentiment. Samsung said its supply of high-bandwidth memory (HBM) chips was sold out for next year, with key customers requesting additional supplies.

However, it expects the supply shortage to continue through 2028. SK Hynix offered a longer timeline, saying its DRAM and HBM chips were sold out through 2029 and that the shortage could persist until 2030. A longer supply shortage could allow chipmakers to maintain higher prices and profit margins for an extended period. Samsung’s comparatively cautious outlook therefore appeared less attractive to investors.

Morningstar analyst Jing Jie Yu told Reuters that Samsung’s share-price decline likely reflected its assessment of how long the memory shortage would last. He described the outlook as “marginally less bullish” than SK Hynix’s comments a day earlier. Samsung is also facing the challenge of expanding production quickly enough to meet demand. Building semi-conductor fabrication plants requires substantial investment and several years of work, limiting how quickly the company can increase supply.

Samsung spent 76.8 trillion won on investment this year, a 62% increase, and expects another sharp rise in capital expenditure next year. It said investment in AI infrastructure could reach a historic level in 2027, with demand for AI-related memory expected to exceed industry supply. The spending could help Samsung capture more of the growing AI market, but investors will also assess whether the additional investment translates into sustainable earnings and stronger shareholder returns.

Can Samsung keep pace with SK Hynix in AI chip race? Competition with SK Hynix is central to Samsung’s outlook. Both companies supply memory chips for AI infrastructure, but investors are increasingly comparing their technology, customer demand and production capacity. High-bandwidth memory (HBM) has become particularly important in advanced AI systems. It places memory close to the processor and enables faster data transfer, helping AI accelerators handle large volumes of information.

Samsung said its memory business achieved record quarterly revenue and operating profit. It increased sales of HBM4, its latest generation of high-bandwidth memory, and expanded supplies of server solid-state drives (SSDs). Demand from server customers also pushed up memory prices across applications. The company’s Device Solutions division, which includes its semi-conductor operations, reported revenue of 147.1 trillion won and operating profit of 106.5 trillion won.

Samsung said it would focus on increasing sales of HBM, server DRAM and SSD products as investment in AI infrastructure grows. However, the company still needs to demonstrate that it can secure long-term demand and compete effectively with rivals. SK Hynix’s stronger outlook has raised expectations for Samsung’s future guidance. Samsung is seeking greater visibility into future demand through longer-term customer agreements.

It has signed supply contracts with 10 major customers and is in discussions with another 10. The company aims to secure agreements covering 60% to 70% of its total production capacity by 2030. 91% Kospi rout after a 19-fold profit jump to $58.4 billion Such contracts could help Samsung plan production and gain more predictable revenue. It is also looking to expand its customer base beyond large AI cloud providers to include mobile and automotive businesses.

However, Samsung faces challenges beyond memory chips. Reuters reported that its foundry business remained loss-making, even as the company secured new orders for advanced 2-nanometre chips and logic components used in HBM products. Samsung expects its foundry business to improve as it expands advanced-chip production. It plans to begin mass production next year at its Taylor plant in Texas, where it will manufacture chips for Tesla.

The company is also considering another factory to meet demand for advanced 2-nanometre chips. How are higher memory-chip costs affecting Samsung’s other businesses? The semi-conductor boom has not benefited all parts of Samsung equally. Higher memory-chip prices have increased costs for its mobile division, putting pressure on margins. The mobile business recorded an operating loss of 800 billion won, reported Reuters.

Samsung’s results also showed an operating loss of 0.8 trillion won for its Device eXperience division, which includes mobile and consumer electronics businesses. Its television and home appliance operations also faced pressure from higher costs and weaker demand in some product categories. This shows the uneven impact of the AI-driven chip boom across Samsung’s businesses. While its semi-conductor division has benefited from higher memory prices, other divisions are dealing with rising component costs and weaker margins.

The company expects AI-related demand to support its semi-conductor business in the coming quarters, particularly for server DRAM, HBM and storage products. However, investors must weigh this opportunity against the cost of expanding production, competition from SK Hynix and uncertainty over the pace of AI spending. Concerns about how technology companies will finance their infrastructure investments and competition from Chinese chipmakers have also affected semi-conductor stocks, Reuters reported.