Samsung's stock just dropped despite promising an 1,800% jump in profits

Tuesday’s decline (and the continued fall on Wednesday) came despite a company announcement that it expects operating profit to jump 1,800% — and its quarterly profit was better than both Apple and Nvidia.

This is the second notable dive for Samsung stock in the past few weeks. In late June, shares fell 12%. (Rival chipmaker SK Hynix was down an equal amount that day.) That triggered a 20-minute trading halt by the exchange operator.

“It’s unnerving that you’re seeing this kind of volatility,” Alexander Redman, chief equity strategist at the brokerage CLSA, said at the time. “It just feels very, very frothy.”

Big earnings, but not big enough

Samsung reported a preliminary operating profit of about $58 billion for the April–June quarter. That was 6% above analyst expectations. Normally, that would cause the stock to surge, but expectations in the artificial intelligence space are sometimes unreasonably high.

Some investors could also have been taking profits. Despite Wednesday’s drop and the decline in June, Samsung shares are up 116% year to date — and more than 350% in the past year.

The selloff in Samsung had ripple effects throughout the sector, though. SK Hynix was down just under 5% on Tuesday and another 6% Wednesday in South Korea. U.S. memory makers saw losses as well Tuesday, but regained strength in early trading Wednesday.

Foreshadowing?

The drop for Samsung comes as Korea’s second most valuable company, SK Hynix, is preparing to list its stock on the Nasdaq this Friday.

It’s planning to raise almost $30 billion. If it succeeds, that will make this the second largest offering in the U.S. of all time, displacing Alibaba’s $21.8 billion raise in 2014.

The money will be used to help fund its expansion and keep up with demand from AI companies for its most-advanced chips. SK Hynix is currently building a campus of massive memory chip fabrication plants in South Korea, known as the Yongin Cluster. That’s expected to come online in 2027. The company is also building a packaging plant in Indiana.

In Korea, shares of SK Hynix have more than doubled since the start of the year. But given the increased volatility in the chip and memory sectors, thanks in part to the supply crisis created by demand from AI companies, there’s growing concern that maintaining growth could be a challenge in months to come.