(Bloomberg) -- Samsung Electronics Co.’s shares rose after Nvidia Corp. founder Jensen Huang expressed confidence in the Korean company’s ability to resolve technical issues dogging its highest-end memory, offsetting disappointing quarterly results.
The world’s biggest memory maker shouldered hefty research and development expenses and front-end capacity expansion costs in the December quarter in its effort to catch up to SK Hynix Inc. and Micron Technology Inc. in the lucrative AI market. Samsung has struggled to get its latest products certified by Nvidia, allowing SK Hynix in particular to carve out a larger slice of the market for the high-bandwidth memory that AI accelerators depend on.
Investors had braced for disappointing numbers from a company that shed a third of its market value in 2024, even while SK Hynix soared more than 20%. On Wednesday, Samsung’s stock gained as much as 3.1% after Huang said at the CES show in Las Vegas that Samsung has to engineer a new design but that it’s “working very fast.”
Samsung’s mustering its forces in a costly effort to claw back market share in the AI chip arena at the same time that demand for its conventional semiconductor chips for PCs and mobile devices weakened. Its smartphones, TVs and other appliances are also facing growing competition, while the operating rate in its foundry business dropped, the company said in a statement.
Korea’s largest company reported preliminary operating profit of 6.5 trillion won ($4.5 billion) for the December quarter, falling short of analysts’ average projection for 8.96 trillion won. Revenue came to 75 trillion won, just shy of estimates. Samsung will provide a full financial statement with net income and divisional breakdowns later this month.
“Samsung is just going through one of its toughest moments in its history,” Counterpoint analyst Tom Kang told Bloomberg Television. Samsung missed the high-bandwidth memory boom and needs to show it’s supplying AI memory to new clients. “They are really trying hard to catch up.”
Billions of dollars are at stake. Just last week, Microsoft Corp. said it plans to spend $80 billion building out data centers this fiscal year alone, triggering a broad rally in SK Hynix and other AI beneficiaries. SK Hynix posted record profit in October as Nvidia’s accelerators require more and more memory.
Investors remain cautious about Samsung’s chances at overtaking its smaller but nimbler competitors, however. Samsung remains heavily exposed to weak demand for mobile chips, while it also grapples with a rising supply of legacy chips in China. Demand for its smartphone chips is expected to stay weak in 2025, executives said in October. In the TV and home appliances arenas, steep price competition from Chinese manufacturers is also eating margins.
In contrast, SK Hynix plans to reduce production of legacy chips and ratchet up capital expenditures to keep pace with the AI infrastructure boom. The Icheon-based company has announced a series of investment plans, including $14.6 billion on a new memory chip complex and other investments at home and $3.87 billion on an advanced packaging plant and research center for AI products in Indiana.
Last year, Samsung chip division chief Jun Young-hyun apologized for disappointing results and acknowledged delays in winning Nvidia certification.
Samsung must now review its organizational culture and processes, Jun had said — echoing previous comments about the need for fundamental change at one of Korea’s oldest companies. It laid off workers in Southeast Asia, Australia and New Zealand last year as part of a plan to reduce global headcount by thousands of jobs, Bloomberg News reported.
Investors will also be watching when Samsung unveils its latest Galaxy smartphone lineup in San Jose on Jan. 22, promising to make better use of AI.
“While Samsung’s fourth quarter numbers are ugly, the firm likely won’t be a non-factor in high-bandwidth memory for long,” Vital Knowledge’s Adam Crisafulli said in a note to investors.
--With assistance from Georgina McKay and Shinhye Kang.
(Updates with analyst commentary and stock reaction)
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