Nvidia Stock – Samsung’s Chip Business Struggles with Delays in AI Chip Supply to Nvidia
Nvidia Stock – Samsung Electronics, the world’s largest memory chip maker, is expected to announce on Wednesday that its profit growth has continued to slow during the fourth quarter, primarily due to challenges in keeping up with Nvidia’s robust demand for AI chips.
The South Korean tech giant, which also holds the title of the world’s biggest smartphone and television maker, is projected to estimate its operating profit for the quarter ending December at 8.2 trillion won ($5.6 billion), a notable increase from 2.8 trillion won during the same period last year. However, this would mark a decrease from the previous quarter’s 9.18 trillion won, reflecting the ongoing slowdown.
Analyst Adjustments and Profit Outlook
Several analysts have recently revised their earnings estimates downward, with some forecasting that Samsung’s operating profit could fall below the 8 trillion won mark. In October, Samsung issued a rare apology for its disappointing third-quarter results, acknowledging challenges in supplying AI chips to Nvidia but assured progress in addressing the issue. However, since then, the company has not provided any updates, and delays in delivering high-end memory chips to Nvidia have continued to weigh heavily on Samsung’s earnings.
In November, Samsung took decisive action by replacing several key executives within its chip division. Notably, it promoted the head of its chip division to co-CEO and handed him direct control over the struggling memory chip business in an attempt to turn around its performance.
Stock Performance and Market Comparison
Samsung’s shares, which are the most valuable on the Korean Stock Exchange, have suffered significantly, falling by 32% in the past year. This sharp decline starkly contrasts with the broader market’s more moderate 10% loss over the same period.
Meanwhile, SK Hynix, a major competitor and supplier of advanced AI memory chips to Nvidia, is projected to report record earnings for the fourth quarter. The contrast between the two South Korean tech giants highlights the market challenges Samsung faces as its rivals capitalize on the demand for AI chips while it struggles to meet expectations.
Pressure on Chip Prices Amid Weak Demand
Samsung’s performance has also been under pressure due to weaker demand for traditional chips used in mobile phones and personal computers, alongside increasing production from Chinese rivals, which has put a downward pressure on chip prices. Analysts point out that Micron Technology, a major U.S.-based chipmaker, has also faced similar challenges. Last month, Micron forecast its quarterly revenue and profit would fall below Wall Street’s expectations, attributing this to a slowdown in demand for consumer-oriented products. This weak demand for traditional chips has affected not only Micron but also Samsung’s business.
According to estimates by TrendForce, prices of DDR4 DRAM chips, which are widely used in personal computers, plummeted by up to 13% in the fourth quarter of 2023. The trend is expected to continue, with prices forecast to decline another 15% in the current quarter, compounding the difficulties faced by memory chip producers.
While a weaker South Korean won could offset some of the challenges by boosting the value of repatriated earnings, the benefits have been limited. The won reached its weakest level in 15 years in December, following political turmoil triggered by President Yoon Suk Yeol’s martial law decree. Additionally, U.S. President-elect Donald Trump has proposed higher tariffs on imports, adding to economic uncertainty.
Outlook for Logic Chips and Ongoing Losses
Samsung’s business in logic chips, particularly those designed for customers like Qualcomm, is expected to continue facing losses, further eroding its overall chip earnings. Despite efforts to diversify its chip portfolio, the company’s focus on highly customized logic chips has not proven as profitable as its core memory chip business.
Looking Ahead: A Challenging Road for Samsung
In summary, Samsung Electronics is grappling with multiple challenges in the semiconductor market. Despite a recovery in its operating profit from a low base last year, the company is expected to report a slowdown in growth for the fourth quarter. The AI chip market presents a key growth opportunity, but Samsung’s delays in supplying high-end chips to Nvidia have dampened its potential. Meanwhile, price pressures and weakened demand for traditional chips remain significant headwinds for the company.
For now, Samsung’s stock remains under significant pressure, and it will need to navigate these hurdles carefully if it hopes to maintain its leadership in the global semiconductor industry.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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