Samsung Electronics, a leading name in the tech industry, is grappling with challenges as its stock performance trails behind that of its memory-chip competitor, SK Hynix. This underperformance is the most pronounced in the past ten years, prompting investor speculation on the potential dominance of SK Hynix in the evolving artificial intelligence (AI) market.
Year to date, SK Hynix has seen a substantial 67% spike in its shares, bolstered by its deal to supply Nvidia with its high-bandwidth memory chips. In contrast, Samsung’s performance has been modest, with its shares gaining 24% as the tech giant faces hurdles launching its HBM offerings. Options data suggests that the disparity could grow, given the heightened put-to-call ratio on Samsung compared to SK Hynix.
The competition between the two giants unfolds against a backdrop of diminishing global demand for traditional memory products, with smartphones experiencing one of their most significant downturns in over a decade. However, demand for chips is on the rise, driven by the burgeoning need for products tailored to power generative AI services, such as ChatGPT. An illustration of this growing demand is the Philadelphia Semiconductor Index, which has surged 31% this year, surpassing the majority of industry benchmarks.
While Samsung offers contract chip-manufacturing services, opening another avenue to tap into the AI growth, its efforts are overshadowed by Taiwan Semiconductor Manufacturing Co, which controls a majority of the AI processor production designed by companies like Nvidia.
Historically, Samsung has been at the forefront of the memory industry. However, it currently faces the challenge of catching up in the high-bandwidth memory (HBM) realm, a cutting-edge technology tailored to complement AI accelerators. The HBM design involves a stack of DRAM positioned directly on a processor, facilitating rapid data transfer.
SK Hynix has seized the opportunity to lead in the latest generation of this technology, securing Nvidia as a principal client for its HBM3 chip. In contrast, Samsung encountered challenges securing a deal with Nvidia, despite developing its HBM3E chip and announcing plans for an HBM4 launch by 2025.
Yoon Joonwon from DS Asset Management Co observed the unfamiliar scenario of Samsung lagging behind SK Hynix in HBM innovation. He emphasized the importance of partnerships with industry leaders, such as Nvidia or Advanced Micro Devices, to positively impact Samsung’s stock performance. Analysts are also keenly watching yield metrics, which measure the quality of chips produced per material batch, as they await the earnings reports from both companies. While Samsung and SK Hynix have received comparable buy ratings, Samsung’s price targets suggest a potential rise of over 30% in the coming year, as opposed to SK Hynix’s anticipated 20% growth.
Eugene Investment & Securities analyst, Lee Seung-Woo, offered a long-term perspective, asserting that while Samsung may be trailing now, it won’t always be the case. He anticipates Samsung to begin shipping the next HBM3 version this year, narrowing its lead gap with SK Hynix.
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