Samsung’s exhibition stand features the prominent slogan “A new era of mobile agent AI” by the South Korean company Samsung Electronics.
Joanne Crosnull Photo | Getty Images
Samsung Electronics shares fell as concerns about spending and demand overshadowed record second-quarter profits.
Stock prices closed down nearly 7% on Tuesday, despite the company announcing preliminary figures of 89.4 trillion won ($58.4 billion) in second-quarter operating profit ($57.2 trillion in the previous period).
On a year-over-year basis, operating income is expected to increase more than 1,800% in the quarter.
Sales for the April-June period were 171 trillion won, an increase from 133.9 trillion won in the previous quarter. Compared to the same period last year, sales more than doubled.
“Stocks had been pricing in a historic quarter for months, but once it was confirmed that the numbers were significant but not significantly above market expectations, there was little reward for anyone intervening,” said Xavier Wong, market analyst at eToro. “It acts more like confirmation, and confirmation is what people sell.”
“We’re being held back by concerns that spending on AI infrastructure won’t be able to continue to grow at the pace that has driven memory prices up,” he said.
Results exclude one-time charges for employee bonus provisions. Earlier this year, Samsung agreed to eliminate the 1,000% bonus cap on base pay and pay 10.5% of operating profits for bonuses, succumbing to weeks of labor union protests demanding a fair share of company profits.
“There’s a lot of negative news piling up and it seems like everyone wants a piece of the profit. The unions want it, the Korean government wants it,” Tom Kang, research director at Counterpoint Technology Market Research, told CNBC. Additionally, memory prices may have risen too high, raising concerns about demand, he said.
“Our monthly review of memory prices for consumer products, mobile products, and servers shows that prices are still rising,” he said, suggesting that price increases will continue through at least this quarter.
Kang said Samsung’s recent pledge to build a large semiconductor manufacturing plant in southern South Korea was also weighing on the stock price.
He noted that the location is far from the center of South Korea, where traditional manufacturing plants are concentrated, and as it is a “new place,” Samsung would have to start from scratch to build the infrastructure, and the layout deviates from investors’ expectations. Similarly, the market views this as an unusual location that is not typically suitable for high-tech equipment, he added.
The ADR listing scheduled for this week by Samsung’s domestic peer SK Hynix also had an impact.
Mr. Wong of eToro pointed out, “Even if SK Hynix’s ADR listing takes place in the same week, it can’t be helped that some of that rotation will be pulled elsewhere.”
