After a sharp decline, Samsung welcomes a "reverse pickup" moment? JP Morgan remains bullish: the "cheapest storage stock" in the world, the profit explosion cycle will continue.

JPMorgan Chase released its latest individual stock research report on July 7, stating that global semiconductor giant Samsung Electronics has disclosed strong preliminary performance for the second quarter of 2026, easily beating previously lowered market expectations on core profit indicators. Despite setting aside a massive labor cost provision of over 15 trillion Korean won in the first half of this year, Samsung has shown an extremely resilient profit surge thanks to the skyrocketing prices of storage chips and the depreciation of the Korean won. JPMorgan Chase reiterated its "overweight" rating in the report, raising its target price for December 2026 to 480,000 Korean won. Explosive performance, but stock price plunges On July 7, Samsung Electronics announced its second-quarter 2026 earnings forecast, delivering what can be described as an "epic" report card. Sales for the quarter are expected to reach 171 trillion Korean won (about $112.34 billion), a year-on-year increase of 129%; operating profit is expected to reach 89.4 trillion Korean won (about $58.8 billion), a staggering increase of 1810% year-on-year. This figure not only far exceeds analysts' average expectations of 84.2 trillion Korean won, but also surpasses NVIDIA Corporation's operating profit of $53.536 billion in the previous quarter, making Samsung the company with the highest quarterly operating profit globally. However, Samsung's "explosive" financial report received a cold response from the capital market. On the day of the earnings announcement, Samsung Electronics' stock price plummeted at the opening, dropping by as much as 10% intraday. SK Hynix, another player in the semiconductor camp, fell over 6%, while Samsung Motor fell over 8%. The South Korean KOSPI index plummeted nearly 6%, and the Korea Exchange initiated a circuit breaker mechanism as the KOSPI 200 futures fell 5%. This is the 6th time in 2026 that the South Korean stock market has triggered a market-wide circuit breaker. A real-life version of "buy the rumor, sell the fact" is unfolding in the super cycle of storage chips. Why is the market not buying it? Three major concerns emerge Concern 1: Good news is exhausted, "perfect" has been priced in early Samsung's stock price has skyrocketed from a low of 60,200 Korean won on July 9, 2025, to a peak of 374,500 Korean won on June 19, a 522% increase. The market had already priced in the "better-than-expected" in months. eToro market analyst Zavier Wong bluntly stated, "The stock price had priced in this historic quarter months ago, and when the data confirms it was important but not far beyond market expectations, there is nothing to reward. This is more of a confirmation, and confirmation is the time to sell." Statistics show that in the past eight preliminary earnings releases, the stock price has fallen on the release day or the next day four times. Concern 2: Losses in foundry business expand, structural cracks appear Under the glow of the storage business, Samsung's other business sectors are facing pressure. Analysts predict that due to the proportional inclusion of bonus provisions in the overall costs of the semiconductor sector, Samsung's foundry and logic chip (LSI) business may further expand its losses this quarter. Previously estimated by the market, the operating losses from the merger of foundry and system LSI in 2023 were approximately 2.5 trillion Korean won, expanded to 5.3 trillion Korean won in 2024, and further climbed to about 6 trillion Korean won in 2025. However, positive signals are also emerging. According to industry sources in the South Korean semiconductor industry, Samsung's foundry business unit achieved a monthly profit in June for the first time since 2023. The continuous increase in the shipment volume of HBM base chips, coupled with a significant improvement in the yield rate of the 4nm process to around 80%, has driven this turnaround. Samsung is optimistic about achieving quarterly profitability in the third quarter. Concern 3: Sustainability of AI capital expenditure questioned More than the financial report itself, the signals released upstream in the industry chain are worth noting. Meta recently hinted at setting a cap on AI capital expenditure, which the market interprets as an early warning that investment in AI infrastructure by tech giants may have peaked. Morgan Stanley's chief equity strategist Michael Wilson pointed out that the Philadelphia Semiconductor Index has fallen nearly 12% from its high, and global funds are shifting from the semiconductor sector to AI supercomputing giants. The BlackRock Investment Institute's Jean Boivin team is more direct, stating that the core of the AI bubble debate is not current valuation but whether future earnings can be maintained at extraordinary levels. Albert Yong, managing partner at Petra Capital Management, stated, "Samsung's strong earnings have long been in the market's widespread expectations. Now, investors are starting to look further ahead, and what they are really concerned about is the sustainability of this AI frenzy and whether US tech giants will slow down their capital expenditure on AI infrastructure." JPMorgan Chase: Firmly bullish on "higher and longer upward cycle" Financial insights: Delivering a "stunning" report card despite massive provisions Based on the preliminary data disclosed by Samsung Electronics, JP Morgan conducted a deep comparison and analysis of core financial indicators: Operating profit (EBIT) achieved an astonishing year-on-year increase: In the second quarter, the preliminary operating profit reached 89.4 trillion Korean won, a quarter-on-quarter increase of 56% and a year-on-year increase of 1812%. This performance significantly surpassed Wall Street's previous expectations of 75 to 84 trillion Korean won, exceeding the consensus expectation of 85.932 trillion Korean won by 4%. Continued expansion in revenue scale quarter-on-quarter: Total revenue reached 171 trillion Korean won in the second quarter, a quarter-on-quarter increase of 28% and a year-on-year increase of 129%. Although this value was slightly lower than the consensus expectation of 176.053 trillion Korean won by 3%, the overall sales and shipments were slightly better than the company's initial official guidance. High operating profit margin operation: Thanks to the strong trend in chip prices, Samsung's operating profit margin (EBIT Margin) rose from 42.8% in the first quarter to 52.3% in the second quarter, compared to just 6.3% in the same period last year. Jay Kwon, an analyst at JPMorgan Chase, pointed out that the key contributors to this better-than-expected performance were the surge in memory chip prices and the depreciation of the Korean won. In terms of product segmentation, the comprehensive average selling price (ASP) of flash memory (NAND) soared by over 70% compared to the previous quarter, far exceeding Morgan Stanley's earlier forecast of 53%; while the average selling price increase of DRAM was slightly lower than Morgan Stanley's expectations due to product mix reasons, the company effectively supplemented the total shipment volume by releasing strategic inventories (more DRAM releases than NAND). Differentiation in structure: AI energy storage catalyzes storage frenzy, foundry and mobile department under pressure Although the overall performance was positive, Samsung Electronics' major business sectors are showing a significant "two sides of the coin" trend, with the profit gap between storage business and non-storage business further widening: Storage chips (flash and DRAM) The overall procurement rate in the entire storage industry is very low, and customers can only meet 50% to 60% of their purchasing needs through existing supply. Many industries are facing an epic shortage. Due to the huge pressure of the bill of materials (BOM) cost, downstream consumer electronics customers are starting to show resistance, and resources are rapidly shifting towards memory consumption driven by servers. JPMorgan Chase specifically pointed out that due to the frenzy of large-scale cloud computing companies in the US (hyperscalers) purchasing enterprise-level SSDs for KV cache offloading, NAND prices may again exceed market expectations in the second half of the year (expected to increase by around 20% quarter-on-quarter). Foundry and System LSI (Foundry/LSI) The good news is that the 4nm base chip for HBM4 has entered full-scale mass production, providing strong support for this department's top-line revenue. As Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) continues to face tight advanced process and packaging capacity, industry sources have indicated that large factories such as Alphabet Inc. Class C (GOOGL.US), Anthropic, Meta (META.US), AMD (AMD.US), and BYD Company Limited (BYD.US) are in talks with Samsung for potential AI chip projects and foundry collaborations. Previously, Samsung secured orders for Tesla, Inc. A15/A16 chips and Apple Inc. CIS business. However, the department's losses in the second quarter may have expanded due to the fixed cost pressure from the massive labor cost settlement in the first half of 2026, and the key to turning losses around in the future depends entirely on the implementation of the new orders mentioned above and the capacity expansion of the Taylor foundry in the US. Mobile Experience Department (MX) Due to the continuing price hikes of key components, Samsung's MX department, responsible for smartphones and other businesses, is seeing an accelerated deterioration in year-on-year profit margins, and it is uncertain whether this department has already fallen into losses in the second quarter. Wall Street Outlook: The cheapest storage stock in the market, long-term catalysts ahead JPMorgan Chase points out that Samsung Electronics' stock price currently corresponds to a forward 12-month price-to-earnings ratio (FTM P/E) of only 5.2 times, making it the globally cheapest priced quality asset in storage. The current market pricing only reflects a small portion of the structural supply and demand transformation dividends (such as years-long shortages, increasing long-term agreement LTA shares, etc.). Investor pessimism has led to a previous stock price pullback, providing an excellent opportunity for long-term investors to buy on the dip. Looking to the second half of 2026, although the momentum of price increases may slow down due to base effects, Samsung will proactively engage in long-term supply agreements (LTAs) with core cloud service providers (CSPs). The next catalyst in the market will focus on: CSPs' stance on the progress of AI monetization for business models and hardware capital expenditures (Capex) updates; progress in locking in long-term storage agreements (LTA), including quantity, price guarantees, and profit margin baselines; Samsung's own updated shareholder return policy (Morgan Stanley forecasts that Samsung's total shareholder return pool for 2024A-2026E will exceed 110 trillion Korean won, with the market closely watching the proportion of free cash flow used for repurchases and dividends in 2026). Samsung Electronics is expected to disclose its complete second-quarter earnings report and more detailed operational data on the morning of July 30th, Asian time, when the global technology industry and capital markets will further calibrate the future direction of the AI and semiconductor cycles.