Samsung Electronics announced that it anticipates chip shortages to intensify and last until 2028, following a profit increase in chips that exceeded 250 times, alleviating investor worries that intense AI investment by leading tech companies might decline and hinder growth.
Stock of the leading global memory chip manufacturer jumped by as much as eight percent after it revealed information about its long-term memory chip supply agreements with key tech companies and indicated a strategy to revitalize its unprofitable foundry division "soon."
"The supply shortage in 2027 is expected to worsen compared to this year, and it is expected to continue in 2028," according to Jaejune Kim, executive vice president of Samsung's memory business.
Also Read: Abu Dhabi to Open Guggenheim Abu Dhabi in December this Year
He mentioned that Samsung has entered into long-term supply contracts with the leading five data center companies globally and is close to finalizing agreements with five additional large firms, although their names were not revealed.
He mentioned that its long-term agreements would extend for a minimum of five years and represent 60 percent to 70 percent of its overall capacity in the long run, noting that these contracts featured initial payments and pricing floors intended to mitigate the risks associated with its capital expenditures.
"Management's commentary on the conference call was better than expected, and it was one of the more reassuring calls we've heard in quite some time," says Ryu Young-ho, a senior analyst at NH Investment & Securities.
Also Read: BYD Launches EV Mini-Car in Japan
This comes after a steep decline in recent months, as semiconductor stocks have weakened due to investor worries about financing the AI infrastructure development and competition from China, which may strain chip profits.
"In H2 2026, the Memory Business expects robust demand centered on servers stemming from continued AI infrastructure capex and broader adoption of agentic AI," according to Samsung.
"This is projected to keep the market undersupplied, despite partial demand moderation in mobile and PCs."
Samsung's semiconductor arm reported an operating profit of 89.2 trillion won ($61.7 billion) in the second quarter, a rise of more than 250 times compared to the previous year. Nonetheless, the rising chip prices adversely impacted Samsung's mobile segment, resulting in a 700 billion won loss, marking its first quarter in the negative.
Also Read: LG Innotek and TDK Join Hands on Robot Sensing
"The chips enriching one side of Samsung are now hurting the other, leaving the group more exposed than ever to memory pricing and the durability of hyperscaler demand," said Josh Gilbert, an analyst at eToro.
Samsung announced an operating profit of 89.5 trillion won ($61.98 billion) for the April-to-June quarter, aligning with its forecast of 89.4 trillion won and increasing from 4.68 trillion won compared to the previous year.
The revenue of the South Korean firm increased by 130 percent to reach 171.5 trillion won in the quarter compared to the same period last year.
SK Hynix, Samsung's competitor in the same city, announced impressive quarterly results on Wednesday but did not meet high expectations from investors. It indicated intentions to increase capital expenditures this year by approximately 50 percent to address the soaring demand for AI.