(Bloomberg) — Shares of Samsung Electronics Co. rose after Nvidia Corp. said it is working to certify the company’s high-bandwidth memory chips, a crucial step that would allow the Korean company to capitalize on growing demand for AI technologies.
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The stock gained as much as 3.6% in early Wednesday trading in Seoul. Samsung shares were down about 4% this year before Wednesday’s trading, trailing leading chip players.
Nvidia Chief Executive Officer Jensen Huang told reporters on Tuesday that his company is investigating the so-called HBM chips that Samsung and Micron Technology Inc. to offer. Nvidia’s approval is needed before either company can compete directly with SK Hynix Inc., whose stock price has soared since it began supplying Nvidia with HBM3 and more advanced HBM3e chips.
“Despite initial setbacks in obtaining Nvidia’s approval for its [eight-layer] HBM3e, we are quite optimistic about its approval in the next two to three months,” said Sanjeev Rana, analyst at CLSA Securities Korea.
Samsung has fallen far behind its smaller rival in that market, which has experienced explosive growth because its chips are used to train artificial intelligence models like ChatGPT. Although Samsung failed any qualification tests, the HBM product needed more engineering work, Huang told reporters.
“We just have to do the engineering. It’s just not done,” Huang said during a briefing at Computex in Taipei. “I want it done yesterday. But it’s not done yet. We must be patient.”
Shares of SK Hynix fell as much as 2.3% on Wednesday.
Huang’s comments came after Reuters reported that Samsung was struggling with heat and power consumption issues in its HBMs, which are designed to work with Nvidia’s AI accelerators.
“There is no story,” Huang said when asked directly about that article.
Investors are concerned about Samsung’s response to SK Hynix, which recently reported its fastest revenue growth since at least 2010. The growing gap is believed to be one of the main factors behind Samsung’s recent decision to replace the head of its semiconductor division – an unusual situation. This move signaled to investors the company’s resolve to make up lost ground.
In contrast, SK Hynix’s production capacity for such chips is almost fully booked until next year. Given the capacity constraints, Nvidia could benefit from a strong alternative supplier.
“Nvidia needs more suppliers for HBM,” said Masahiro Wakasugi, technology analyst at Bloomberg Intelligence. “If Samsung can deliver the next generation of HBM, that would help Nvidia.”
Samsung – the world’s largest maker of memory chips overall – says it has already started mass production of its latest HBM product, the eight-layer HBM3E, and plans to mass-produce 12-layer versions in the second quarter. The company expects HBM’s supply to at least triple in 2024 compared to last year. Samsung is working with Advanced Micro Devices Inc., which competes with Nvidia in AI chips.
“As visibility on upcoming Nvidia and AMD offerings improves in the second half of 2024, we expect some relief from the shares,” CLSA’s Rana said.
–With help from Vlad Savov and Jane Lanhee Lee.
(Updates with analyst comments from the fourth paragraph)
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