The share price of companies making AI chips has seen a meteoric rise in the past year. NVIDIA is up 146.69% over the past year, while its main high-bandwidth memory chip supplier SK Hynix saw a 47.53% surge. Despite its lead in the NAND and DRAM segments, Samsung Electronics' stock has only seen a 14.59% increase over the past year.
This is influenced by the performance of Samsung's mobile, consumer electronics, appliances, and other businesses as well, not just semiconductors, since the shares of the chip division aren't listed separately. It's safe to say Samsung stock has underperformed considerably but it's quickly becoming a hot favorite of investors as they anticipate a big AI chip win for Samsung.
Smart money is moving into Samsung Electronics stock
Samsung's stock has underperformed compared to others in the semiconductor industry partly because it has lagged behind SK Hynix in winning lucrative orders for high-bandwidth memory, particularly from NVIDIA, despite the fact its chip division made $4.67 billion in profit and high-bandwidth memory sales were up 50% this past quarter.
Investors are now bullish on the stock's prospects. Overseas funds make up a significant chunk of daily trading in the Asian markets and they have sold $1.5 billion in SK Hynix shares, the first withdrawal in three months, while adding $2 billion in Samsung shares. Money isn't just moving out of Korean semiconductor stocks into Samsung, the shift is happening overseas as well.
Global funds have sold $5.8 billion in TSMC stock and it's expected that some of that money has made its way into Samsung, as TSMC's shares had their first monthly loss since September 2023. Investors may now feel that the stocks which has been hot over the past year have run their course and a correction is in order, so funds are being moved into stocks viewed as undervalued, and Samsung Electronics fits that bill.
There's also the expectation that Samsung will win approval from NVIDIA for its next-generation HBM3E chips that will be used for AI accelerators. If that happens, Samsung's revenues will “grow explosively,” according to Jung In Yun, CEO at Fibonacci Asset Management Global, and higher profits will follow.
Editor's note: Not investment advice.
