Samsung's AI Ambitions Falter as $122 Billion Market Value Vanishes Amid Chip Struggles
1min read In recent months, Samsung Electronics appeared poised to capitalize on the global frenzy surrounding artificial intelligence (AI), with profits soaring and its stock price reaching an all-time high. However, concerns have emerged about the company's competitive edge in the AI chip sector. Losing to SK Hynix in high-bandwidth memory (HBM) and lagging behind TSMC in outsourced chip manufacturing, Samsung's share price has plunged 32% since its peak on July 9, amounting to a staggering $122 billion loss in market value.
Despite Samsung's pledges for sweeping reforms to regain competitiveness, skepticism remains among international fund managers, including Pictet Asset Management Ltd. and Janus Henderson Investors SP Ltd., regarding the company's quick turnaround. Over $107 billion in Samsung stocks have been net sold by overseas investors since late July.
Sat Duhra, a portfolio manager at Janus Henderson, remarked on sharply reducing their holdings in Samsung, noting that while the stock's valuation appears attractive, there is no immediate plan to reinvest. Currently, Samsung’s revenue remains heavily reliant on smartphones and consumer electronics. The crisis in its chip business recently compelled the company to issue a rare apology for disappointing earnings.
The AI revolution is now a decisive factor in the semiconductor industry's success stories. Contrasting Samsung's challenges, firms like SK Hynix dominate the HBM space. As foreign investors retreat, giants such as Nvidia surmount record-high valuations, and TSMC continues significant market cap gains, capitalizing on AI's potential.
Samsung's roller-coaster journey began with a 15-fold surge in operating profits for the June quarter, propelling its stock to new peaks. Optimism surrounding Samsung's potential to secure more business from Nvidia seemed promising in August. Nevertheless, reports from SK Hynix about HBM production advances in early October, coupled with Samsung's announced HBM production delays, further deepened investor concerns.
Samsung has since acknowledged delays in delivering HBM chips to Nvidia, provoking an apology from its chip division leader. Analysts, like Young Jae Lee of Pictet Asset Management, indicate Samsung's waning semiconductor leadership, attributing difficulty in regaining such a position in the short term. "We've been reducing our positions in Samsung," Lee confirmed.
Neil Campling of Chameleon Global Capital previously noted, "Samsung's loss is Hynix's gain," as SK Hynix secures a stronger foothold in the lucrative HBM market, already capturing significant future shares from Nvidia.
