Profit Soars 19-Fold, Stock Price Plunges 8%: Samsung's Perfect Earnings Report Highlights "Buy the Rumor, Sell the News" Yet Again?

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Samsung Electronics delivered a report card showing a nineteen-fold surge in profits, but it couldn’t stop its stock price from plunging after the earnings release.

In the second quarter, Samsung Electronics’ operating profit soared nineteen times year-on-year to 89.4 trillion KRW, surpassing analysts’ average estimate of 84.2 trillion KRW. Revenue doubled to 171 trillion KRW, also exceeding the market’s forecast of 169.2 trillion KRW. The driver behind this growth is strong demand for high-bandwidth memory in AI data centers—HSBC data shows that second-quarter DRAM prices rose more than 40% quarter-on-quarter, while NAND flash prices increased over 50%.

After the earnings release, Samsung's stock plunged about 8% in a single day, Korea’s KOSPI index fell 6%, and SK Hynix dropped more than 7%. It's not because the performance was poor, but because it was too good for too long—the market had already bought in ahead. Before the earnings announcement, the US chip stock index rose 2.2%, S&P 500 was up 0.7%, and Nasdaq 100 gained 1.3%. With the positive news realized, funds sold off—the logic is clear.

A Small Revenue Gap

Although revenue of 171 trillion KRW exceeded analysts’ average expectations, it did not reach the optimistic forecast of 173.9 trillion KRW from some institutions. Given the valuations at this height, even this small gap was enough to trigger profit-taking.

There are also internal concerns within the company. Analysts expect losses from the foundry and logic chip business to expand further this quarter. In May this year, Samsung reached a compensation agreement with chip division staff, allocating 10.5% of the semiconductor division’s annual operating profit for special bonuses—if this provision had not been made, the actual profit numbers would be even higher. The highlight in the memory business masks some structural cracks in the company overall.

Meta’s Signal and Sector Rotation

More noteworthy than the earnings itself is the signal released upstream in the supply chain. Meta recently hinted at setting a cap on AI capital expenditure, which the market interpreted as an early warning that tech giants’ AI infrastructure spending may be peaking. This directly triggered one of the most intense two-day sell-offs among high-beta momentum stocks since the pandemic.

Morgan Stanley’s Chief Equity Strategist Michael Wilson said in a report that the Philadelphia Semiconductor Index has fallen nearly 12% from its peak, and global funds are rotating from the semiconductor sector to AI supercomputing giants like Microsoft, Amazon, and Meta. He believes these supercomputing giants have fundamental business support, offering relative room for catch-up gains, further amplifying the selling pressure on Samsung following its earnings announcement.

Jean Boivin’s team at BlackRock Investment Institute was even more direct: The core of the AI bubble debate isn’t current valuations, but whether future profits can maintain extraordinary levels. If AI fails to turn its current scarcity into real productivity gains, today’s extremely high profit expectations will face correction.

Cracks in the Supply-Demand Myth

Samsung’s extraordinary profit surge is built on AI server demand for high-end memory squeezing conventional output, giving leading manufacturers rare pricing power. Nvidia’s Jensen Huang and OpenAI COO Brad Lightcap have both publicly stated that memory shortages are the key bottleneck to AI development. Analysts generally expect this supply-demand imbalance to persist at least until 2027.

But supply side variables are accumulating. China’s Changxin Memory’s catch-up speed on DRAM technology is the biggest competitive variable for Korean manufacturers right now. Asian capacity expansion may not only erode market share but also compress the entire industry’s pricing—memory chips are inherently highly cyclical, and high profit margins depend greatly on the tight supply-demand balance. If Asian manufacturers ramp up massively, this balance may break faster than expected. This is the real reason funds remain cautious about the memory sector.

What SK Hynix Outperforming Samsung Reveals

Within memory giants, capital has already voted with its feet. SK Hynix has seen a cumulative increase of about 260% this year, vs. Samsung’s 165%. The gap comes from focus: SK Hynix is highly concentrated on high-end AI computing memory, while Samsung’s business is more dispersed. This divergence sends a clear signal—in this track, focus is more highly regarded than scale.

However, SK Hynix hasn't escaped unharmed either. It launched its US listing campaign, lowered its funding scale to $28 billion, and its stock fell more than 3% that day, synchronizing with Samsung. The whole sector is under pressure.

What Institutions Are Watching

Brian Cho from Causeway Capital Management put it bluntly: What the market truly wants to see is whether improvements in free cash flow can form sustainable, stepwise changes, and how management treats shareholder returns. The pricing logic has shifted from “how fast profit grows” to “can these profits turn into real cash distributed to shareholders”.

Goldman Sachs maintains a bullish stance on Korean stocks, forecasting the KOSPI to rise to 12,000 points over the next 12 months, and projecting 320% profit growth for listed Korean companies this year.

Samsung’s full earnings report will be released at the end of this month. The breakdown data from each business unit will show the market how much real value this round of AI capital spending has generated. That number will be an important reference for the next stage of the AI hardware investment logic.

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