Key Points Summary
Samsung Electronics reported stunning results for the second quarter of 2026: Operating profit soared by 18 times year-on-year (approximately RMB 397 billion), sales increased by 1.3 times, and the company achieved record-high figures for three consecutive quarters. However, its stock price plummeted by 6.6% on the same day. The reason lies in the shift of capital investment focus from memory chip manufacturers to upstream equipment suppliers. Leading memory companies like Samsung need to expand their AI-related production facilities, which requires a large purchase of equipment. As a result, the earnings of equipment manufacturers in the US, Japan, and Europe will be re-evaluated. Additionally, Samsung's performance did not exceed market expectations; the growth was mainly driven by a short-term surge in memory chip prices. In the long run, the demand for computing power generated by the AI industry remains positive, indicating a promising outlook for the memory chip sector.
Detailed Analysis
1. Profits Soaring by 18 Times: Thanks to Memory Chip Price Explosions
Samsung's profit increase of 18 times was not due to increased sales volumes but rather a dramatic rise in memory chip prices. Last year, memory chip prices plummeted due to oversupply; this year, with the AI boom, there has been a surge in demand for memory (such as DDR5 and SSDs) used in training large models and running AI applications, leading to price increases. As the global leader in memory chips (accounting for nearly 40% of the market), Samsung reaped substantial profits—similar to a miner who suddenly sees high demand for their product (from people in a desert) and can double their earnings.
2. Good Performance, but Falling Stock Price: Capital Shifting to Upstream Equipment Suppliers
Despite the strong performance, the stock price fell because capital has shifted its focus. During a gold rush, those who sold tools and water often made the most money. Now, memory chip companies (such as Samsung and SK Hynix) need to purchase equipment (like lithography machines and etching machines) for AI production, which are dominated by US, Japanese, and European firms (e.g., ASML and Applied Materials). Capital believes that these equipment manufacturers will benefit from Samsung's expansion, leading them to shift their investments to these companies' stocks, thus dragging down Samsung's stock price.
3. Performance Below Expectations: Markets Had Already Factored in Price Increases
Industry insiders say Samsung's performance did not exceed expectations because the market was already aware of the expected price increases in memory chips. Samsung's stock price had already risen in the preceding months, reflecting these expectations. The actual results merely confirmed these forecasts, with no additional surprises, leading to a sell-off as investors sought to lock in profits.
4. Long-Term Outlook for Memory Chips: Strong Demand from AI
Despite short-term stock fluctuations, experts are optimistic about the memory chip industry's long-term prospects. The AI industry is still in its early stages and will integrate into various sectors (e.g., intelligent customer service, autonomous driving, medical imaging). These applications require computing power, which relies on memory chips. As long as AI continues to develop, demand for memory chips will remain strong, ensuring a steady source of revenue for the industry.
5. Samsung's Expansion: Benefiting Equipment Manufacturers
Samsung and SK Hynix' investment plans aim to expand memory chip production. This expansion will create orders for upstream equipment manufacturers, such as ASML and Applied Materials. For example, building a new factory could cost billions of dollars in equipment purchases, boosting these companies' earnings per share (EPS). As a result, capital is likely to invest in these equipment manufacturers, while Samsung's own profits may be diluted due to the investment.
Conclusion
Samsung's situation—rising profits but falling stock price—is a typical example of "expectation mismatches" and shifts in investment focus. In the short term, capital prefers upstream equipment suppliers; however, in the long run, demand from AI will drive the growth of the memory chip industry. Understanding this logic helps explain why a company's good performance may not translate into higher stock prices, as investors focus on who will make more money in the future, not who is currently making the most profit.