The AI boom increased Samsung's profits nearly ninefold. Why did its stock plummet?

On the morning of October 29, Samsung Electronics reported a 783% increase in third-quarter operating profit to a record 107.4 trillion won ($80.4 billion). The result fell slightly short of market expectations, according to CNBC, citing the LSEG consensus. Revenue also came in slightly below forecasts: 195.25 trillion won ($146.1 billion) versus 195.8 trillion won. Nearly all of South Korea’s most valuable company’s operating profit came from its semiconductor division, driven by strong demand for AI memory.

The world's largest memory chip manufacturer has forecast record industry investment in AI infrastructure in 2027 and a worsening shortage of data storage chips. Despite the optimistic forecast, Samsung’s stock plummeted 6.6% following the report’s release. By the afternoon, the decline had narrowed to 4%. The stock has lost nearly 40% from its June peak of 374,500 won.

Samsung announced a quarterly dividend of 30 trillion won ($22.5 billion) and plans to return an additional 55–75 trillion won to shareholders through cash payments and share buybacks. However, the board of directors will not approve the final details of how these funds will be distributed until late January. The lack of a detailed new plan disappointed investors, according to Bloomberg. The agency reports that sentiment was also affected by the semiconductor division’s results, which fell short of expectations, and an increase in capital expenditures.

Samsung posted record profits, but also plans to increase capital expenditures by about 60% in 2026, noted eToro analyst Josh Gilbert. “Until the company explains how these windfall profits will be allocated between new capacity and shareholders, it remains unclear how much will ultimately be returned to investors,” Bloomberg quoted him as saying. Gilbert added that postponing the release of a detailed shareholder payout plan until January “left a void exactly where the good news was supposed to be.”

“The decision to postpone the disclosure of details regarding shareholder payouts until January is disappointing. This gives traders a reason to shift their money into SK Hynix or Micron [stocks] in the coming months, as these two companies have clearer dividend plans,” the agency quoted Rob Lee, managing partner at New York-based Amont Partners, as saying.

Alphabet's earnings report was one of the reasons for the decline in Asian stocks on Thursday morning, according to Reuters. Heavy spending by Google’s parent company triggered a sell-off of its shares in New York—prices plummeted by nearly 10%. After the Asian markets opened, South Korea’s Kospi fell by more than 1%, while the broad MSCI Asia-Pacific ex-Japan index lost 0.7%.

SK Hynix was the exception: its stock rose 3%, following a jump of nearly 11% the day before, thanks to strong quarterly results. Upon releasing its earnings report, Nvidia’s main memory chip supplier announced its intention to return an additional $45 billion to shareholders.

This article was AI-translated and verified by a human editor