KB証券 on the 23rd projected that Samsung Electronics(005930) will be the biggest beneficiary of Google's expanded artificial intelligence (AI) investment, and maintained a "Buy" rating and a target price of 600,000 won.
Kim Dong-Won, head of research at KB証券, said in a report that as of the third quarter this year, Samsung Electronics' memory supply to Google is estimated to account for 50% of server memory demand and 80% for high bandwidth memory (HBM), adding that Samsung Electronics holds the No. 1 share in Google's memory supply and is evaluated as the biggest beneficiary in Google's AI ecosystem.
Kim projected that AI investment by U.S. big tech companies, including Google, will continue for the next several years. He said, "U.S. big tech firms, including Google, believe that 'underinvesting in AI is riskier than overinvesting,'" adding, "Through next year, they will preempt AI infrastructure by guaranteeing rents for external data center operators."
In particular, he noted Google's recent move to develop its next-generation server chip "Frozen v2." He said, "While simultaneously developing the next-generation server chip 'Frozen v2,' optimized for the Gemini model in hardware, the share of in-house chip procurement is expected to expand alongside TPUs," adding, "This year, Google's AI investment is expected to account for more than a quarter of total AI investment by U.S. big tech."
Kim projected that the memory supply shortage will continue through 2028. He analyzed that "with HBM4 production expansion based on 1c DRAM in 2027 and mass production of HBM4E scheduled for the first half of 2028, structural constraints on general-purpose DRAM production capacity will be unavoidable for a long time."
In particular, despite a higher share of long-term supply agreements (LTA) with big tech in the second half of this year, third-quarter memory prices are expected to rise by at least 30% or more. This is because the share of HBM in DRAM wafer production capacity is set to more than double from 15% this year to 34% next year, leading most new capacity to be allocated to HBM.
The earnings outlook is also positive. KB証券 estimated that Samsung Electronics' third-quarter revenue and operating profit will reach 209 trillion won and 110 trillion won, respectively, up 143% and 805% from a year earlier. The operating margin is expected to be 52.6%, and an "earnings surprise" beating market expectations is likely to continue for the third consecutive quarter.