AI Servers, the Engine of Samsung Electronics' Memory Growth [Click e-Stock]

Strong Big Tech-Driven Demand to Continue Through Year-End
Solid Earnings Growth Expected on Expanding HBM

There is a forecast that Samsung Electronics will deliver stable earnings through the end of the year, as strong memory demand from artificial intelligence (AI) server companies continues through year-end.

On the 23rd, KB Securities maintained its target price for Samsung Electronics at 240,000 won and its investment rating at "Buy," citing this backdrop. The previous trading day's closing price was 190,100 won.

Kim Dongwon, Head of Research at KB Securities, said, "AI server companies account for 70% of Samsung Electronics' memory shipment volume, accelerating the shift of memory demand toward servers," adding, "As Samsung Electronics begins shipping HBM4 for Nvidia's top-tier Vera Rubin GPU model scheduled for launch in the second half of the year, the company's premium-focused strategy is also expected to restore its competitiveness in HBM."

Samsung Electronics' HBM4 is evaluated as delivering the industry's best performance by applying 1c DRAM and using 4-nanometer foundry technology to produce its own base die. This year, Samsung Electronics' HBM shipment volume is expected to increase threefold compared to the previous year, while its market share is projected to surge from 16% last year to 30%-35% this year. Since its revenue market share based on HBM4, a high-margin product, is estimated to exceed 40%, strong earnings are also anticipated.

Another positive factor cited is that this year's capital expenditures by the four major North American big tech companies - Google, Microsoft (MS), Amazon, and Meta - are expected to soar 76% year-on-year to 960 trillion won. Analysts note that big tech companies have no incentive to delay large-scale capital expenditure plans when cloud demand exceeds supply, and that there is a strategic intention to secure an early competitive edge in AI by expanding investment in AI infrastructure.

Kim predicted, "Samsung Electronics, which has established vertical integration between its memory and foundry businesses, will directly benefit from the transition to inference AI and the expansion of the physical AI market, allowing for further increases in its corporate value going forward."

Foreign investor inflows are also expected to increase, centered on Samsung Electronics. Over the past week alone, about 1 billion dollars of funds have flowed into EWY, the Korea equity exchange-traded fund (ETF) of MSCI. This is analyzed as being because the Korean stock market within emerging markets is simultaneously offering both earnings growth (up 90% year-on-year) and valuation attractiveness (a price-to-earnings ratio of 10 times). This year, KOSPI operating profit is expected to reach a record high of 583 trillion won, up 90% year-on-year. Of this, the increase in operating profit from semiconductor companies, including Samsung Electronics, is estimated at 224 trillion won, accounting for 84% of the total increase in KOSPI earnings.