Samsung Electronics shares fall as capex concerns outweigh strong Q2

Samsung Electronics shares experienced a decline as worries about spending and demand overshadowed its record second-quarter earnings.

The shares closed nearly 7% lower on Tuesday, despite reporting a preliminary second-quarter operating profit of 89.4 trillion won ($58.4 billion), compared to 57.2 trillion won in the previous period.

Operating profit for the quarter saw an increase of over 1,800% year-on-year. Revenue for the April-to-June period stood at 171 trillion won, up from 133.9 trillion won in the previous quarter, with sales more than doubling compared to the same period last year.

Zavier Wong, a market analyst at eToro, noted, “The stock had already anticipated a historic quarter for months, and once the numbers confirmed it, there wasn’t much additional reward for investors.”

Concerns about AI infrastructure spending and memory prices have contributed to the downward trend in Samsung’s stock.

The results also include deductions for one-off expenses related to employee bonus provisions. Earlier this year, Samsung agreed to remove its 1,000% base salary bonus cap and allocate 10.5% of its operating profit for bonuses following a labor union protest.

Tom Kang, research director at Counterpoint Technology Market Research, mentioned that negative news has been accumulating, with both the labor union and the Korean government seeking a share of the company’s earnings.

Additionally, concerns about memory prices being too high and potential demand issues have impacted investor sentiment.

Samsung’s recent announcement of building large semiconductor fabrication plants in the southern part of the country has further impacted its stock performance.

The decision to establish these plants in a new location has raised concerns among investors, as it deviates from traditional expectations.

Additionally, the upcoming ADR listing of Samsung’s domestic peer SK Hynix has diverted some investor interest.