Samsung Electronics' posted a record quarterly profit on Tuesday but this failed to reassure investors, with the sharp sell-off in the world's largest memory chipmaker expected to weigh on AI and technology stocks when Wall Street opens.
The South Korean technology giant announced its earnings guidance, with second-quarter operating profit of about 89.4 trillion won ($59bn/£48bn), comfortably ahead of analyst expectations of around 84.2 trillion won.
Revenue is expected to reach 171 trillion won, more than double the level of a year earlier.
The figures underline the extraordinary demand for artificial intelligence chips. Samsung's memory business has benefited from soaring prices as technology companies continue to spend heavily on AI infrastructure, with profit margins in memory estimated at around 80%.
Yet the market's verdict was brutal. Samsung shares fell more than 8% at one point, before ending down 6.9%, dragging sector peer SK Hynix lower and leaving the Korean Kospi down almost 5%.
The sell-off reflected a market that has become increasingly difficult to impress after a year of exceptional gains for AI-related stocks.
As Ipek Ozkardeskaya, senior analyst at Swissquote, put it: "Everybody agrees that a 19-fold profit increase is exceptional. But the stock price has risen more than sevenfold over the past year."
She said investors were increasingly focused on the market's unofficial "whisper numbers" rather than published analyst forecasts. "In richly valued markets, meeting expectations is no longer enough; companies increasingly have to beat the whisper number as well."
Kenny Polcari at Slatestone said the story isn’t that Samsung is broken, "it’s that expectations have become extraordinarily high. In a market priced to perfection, beating estimates is no longer enough – you have to continue to raise the bar and WOW them".
Kathleen Brooks at XTB said fundamentals for the chip sector "remain strong... but the bias towards profit taking is slowing momentum and triggering bouts of volatility".
The sharp reversal for one of the key global names in AI memory chips is likely to unsettle US technology stocks when trading begins later on Tuesday.
Nasdaq futures pointed to a loss of around 1%.
Attention is also turning to SK Hynix, Samsung's domestic rival, which is due to list on Nasdaq later this week in a listing with an associated fundraise to drum up about $28 billion.
Brooks said: "On the surface the US listing looks like it is designed to boost its valuation in line with larger US rivals like Micron. The question is what happens after this IPO, can SK Hynix sustain gains if enthusiasm for the AI trade starts to falter?"
