Samsung Electronics (KRX:005930) announced on Tuesday that it expects second-quarter operating profit of 89.4 trillion won on sales of 171 trillion won, resulting in a group margin of approximately 52%. The results, which more than doubled sales year-over-year and increased operating profit roughly 19-fold from the same period last year, were released after the market close in Seoul.
Despite the record numbers, Samsung shares dropped 6.3% in Wednesday's trading, contributing to a 5.35% decline in the KOSPI index. The South Korean benchmark is now more than 20% below its June 22 record high, entering correction territory. SK Hynix (KRX:000660) also fell 5.7%, while the PHLX Semiconductor Index lost 4.7% on Tuesday, breaking below its 50-day moving average for the first time since April.
Market Reaction and Analyst Views
The selloff reflects investor concerns that the memory upcycle has already been priced in. Albert Yong at Petra Capital noted that the strong result “had largely been priced in,” while Morningstar’s Jing Jie Yu cited “more moderate DRAM price hikes” than some investors anticipated. With operating margins above 50%, even a minor DRAM price decline could significantly impact profitability.
Samsung's shares closed at 277,500 won, about 26% below its 52-week high of 374,500 won. SK Hynix fell to 2,076,000 won, now 31% off its high ahead of its planned Nasdaq listing.
SK Hynix ADR Offering
SK Hynix is proceeding with a $28 billion ADR bookbuild, offering 17.79 million new shares at a reference price of 242,500 won per ADR. The offering has been oversubscribed multiple times, according to Reuters. Proceeds will be used for South Korean fabrication facilities and equipment, including an EUV scanner from ASML Holding (AMS:ASML). Dave Mazza at Roundhill Investments described the U.S. listing as more about “accessibility discount” than “quality discount.”
Market Structure and Regulatory Concerns
South Korean regulators are monitoring risks from stock swings, particularly single-stock leveraged ETFs tied to chip stocks. The KOSPI drop on Wednesday triggered a sidecar curb, while foreigners bought 335.9 billion won in shares after 13 consecutive days of selling. The won traded firmer at 1,498.5 per dollar.
The iShares Semiconductor ETF (NASDAQ:SOXX) edged up 0.36% in U.S. trading on Wednesday, while Micron Technology (NASDAQ:MU) slipped 0.5% and Nvidia (NASDAQ:NVDA) was nearly flat.
Outlook
Samsung will release full second-quarter results on July 30. SK Hynix is set to update pricing after the Seoul market closes on Thursday, ahead of Nasdaq's open on Friday. Investors are closely watching DRAM and NAND price trends, division margins, and AI data center orders rather than just headline profit figures.
Samsung started the quarter with 119.24 trillion won in net cash, following first-quarter operating cash flow of 40.27 trillion won. The company's strong balance sheet provides a buffer, but the market's focus has shifted to earnings duration and the sustainability of the memory cycle.
