Samsung’s Blowout Projections Trigger Selling and the Semi Top Could Be in

Samsung Electronics (KR:005930), the world’s largest maker of memory chips by sales, on Tuesday updated its earnings forecast to indicate that the electronics conglomerate is anticipating record sales and profits — but it saw its shares sink nevertheless.

Samsung shares corrected 6.9%, with South Korean rival SK Hynix down a similar 6.1% in sympathy. The declines prompted a circuit breaker to kick in for the Seoul market for the sixth time this year, halting trade for 20 minutes with the benchmark Kospi down as much as 8.2% during the day. The Kospi settled back after trading resumed to end Tuesday on a 4.9% fall.

Currency Takes a Hit, Too

The Korean won, which has lost 10.1% against the U.S. dollar over the course of the last year, dipped 1.1%. It is stronger than June’s weakest levels, trading now at 1,515 to $1 versus 1,560 to $1 at previous levels, but has generally been losing ground against the U.S. dollar like the Japanese yen and the majority of Southeast Asian scrip.

To be honest, the moves are now commonplace in the Korean market. In my last column, I was interpreting how we should read the fact that the entire Korean market had just lost 7.9% in a day, with Hynix down 14.6% and Samsung off 9.1%.

Business as Usual for Volatile Seoul Market?

Last month, we had a “Black Monday” on June 8, with the Korean market down 8.3%, followed by the “Black Tuesday” fall on June 23, when declines for Samsung (down 12.1% that day alone) and Hynix (down 14.2% for that day) triggered a worldwide memory-stock selloff.

How do we then interpret today’s downturn in Samsung shares?

It certainly indicates that we are looking toppy when it comes to semiconductor shares. That’s the main takeaway for me. We see sympathy selling across semi stocks when there’s market-moving news for any single one.

DRAM ETF Pounding

The Roundhill Memory ETF (DRAM) is taking an even heavier hit to the chin. It’s down 8.5% in early trade, back below the $60 mark that it first crossed in late May. Two weeks ago, it rose above $80.

I’m typically a buy-and-hold investor. But investors can capitalize on the volatility in the DRAM share price by trading in and out of it, buying around $60 and selling on any large percentage daily gain, and certainly booking profits if it nears $80 again.

DRAM may constitute a solid long-term holding but it is experiencing just as much volatility as the Korean market.

Global Contagion From Samsung Selldown

Micron Technology (MU) shares are down 5.6% in early trade. Micron, Samsung and Hynix combined make up 75.7% of the total exposure in DRAM at last count, a highly concentrated portfolio that nevertheless offers exposure to other overseas listed chipmakers such as Tokyo-listed Kioxia Holdings (KXIAY) (T:285A), and the Taiwanese chip designers Nanya Technology (NNYAF) (TW:2408) and Winbond Electronics (WBEKY) (TW:2344).

Kioxia, now Japan’s largest company by market size, saw its shares fall 11.3% in Tokyo trade. It is a direct competitor to Samsung on flash NAND memory. Winbond lost 4.9%, and Nanya shares fell 4.2%.

But other Asia-based chip producers such as Tokyo Electron (TOELY) (T:8035) held up better on Tuesday, its shares down “just” 3.9% in Tokyo trade.

Samsung Not Suffering Like Broadcom

Any earnings weakness at all will be punished severely, as it was for Broadcom (AVGO) back in early June. That’s when its Q2 earnings came in higher than expected, but the company maintained revenue guidance on AI-linked sales in particular, rather than shoot the moon.

AVGO sold off 19.5% in the next two days. Broadcom shares have yet to recover, drifting slowly south to now.

In a sense, then, Samsung is getting off easy. Let’s not forget that its profits are strong.

Samsung Earnings Due at end of Month

Samsung is not actually reporting earnings on Tuesday. Those are due on July 30. But it is updating its preliminary guidance ahead of the earnings release.

The nitty gritty? Samsung expects operating profit of 89.4 trillion Korean won ($59 billion), off of sales of 171 trillion won ($112.9 billion). You can find its very brief statement here.

That would be a 19-fold increase in quarterly operating profit. Nineteen times! And yet investors insist on more. Analysts had forecast operating profit of 84.3 trillion won, on sales of 169 trillion won. The sales are up 129% over Q2 2025.

If Samsung’s Q2 operating earnings match Tuesday’s forecast, it would easily eclipse its previous quarterly record of 2.8 trillion won from Q1 2025. It would also be equivalent to all its operating earnings over the previous three years combined.

Profits to Back This Year’s Chip Rally

So these are whopping earnings increases, hard really to get your head around. Chip-stock bulls would point to these earnings as evidence that the rally is built on a far more solid foundation than the dot-com boom, when venture capital chased consumer companies like Pets.com or Kozmo.com based on a promising idea — and no profits.

Samsung has successfully played catchup in providing the high-bandwidth memory (HBM) chips that power artificial intelligence facilities and operations, having given Hynix a sizeable head start thanks to its prior focus on the commoditized DRAM and NAND (short for the Boolean function “not and”) chips that power consumer electronics like smartphones.

DRAM and NAND chip prices had been flagging. But given production bottlenecks at chipmakers, and the scramble for supply among their customers, even commodity chips are up 40% in Q2 for DRAM and 50% in the case of NAND, according to analysis from HSBC Holdings.

But there has been a pattern of circular investment among the cluster of hyperscalers and chip designers surrounding Nvidia (NVDA). The market was spooked by reports that Meta Platforms (META) is looking to sell excess cloud-computing capacity, suggesting it has overbuilt.

TSMC Slips Little

It’s always instructive to look at the performance of Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330) when we see big moves in the Korean chipmakers. TSCM slipped only slightly, down 0.8% on Tuesday, leaving it still up 53.9% on the year so far.

That indicates the broader chip story remains strong. TSMC doesn’t really care which company is getting its chips fired in its foundries. It is suffering in U.S. trade, down 5.0% in early going, but trimming its losses. We should see far more severe selling if the chip industry as a whole is heading down the tubes.

Samsung and Hynix last week committed to invest 800 trillion won ($528 billion), with as much as 111 trillion won ($73 billion) in government backing, to build chipmaking plants in under-developed parts of South Korea, in particular the southwest.

Hynix Kicks Off Week’s Listing

And Hynix on Monday kicked off its bookbuilding on its planned $28.1 billion listing on Nasdaq. The shares are scheduled to start trading on Friday (July 10) under the symbol SKHY, with final pricing for the offer on the day before.

I mulled in a recent column as to whether retail investors should consider Hynix a buy. To reinforce the volatility of stocks like Hynix, the company was forced to revise the offering from its initial intended plan to raise $29.4 billion, after Hynix shares slid 12%. But the ultimate effect should be positive, to broaden the company’s investor base away from the concentrated trading on the Seoul stock market.

Samsung’s prelim earnings set the tone for other sector heavyweights. What today tells us is that business is very, very good. But investor expectations are even more demanding.

The market is trying to price in future growth, so it is looking for any sign that chip demand is peaking. There’s also summertime “sell on the news” profit taking today, particularly among highly levered Korean retail investors.

Expect volatility to remain incredibly high among chip stocks for the rest of the summer. Selling will likely surround any earnings moment. But I would expect a bounceback in the Korean chipmakers ahead of the Hynix listing on Wall Street.

At the time of publication, McMillan was long DRAM and TSMC.