Samsung forecast an increase of more than 20 per cent in Q2 revenue due to heightened demand for AI products, resulting in a major bump for its memory chips.

The Korean vendor estimated sales will hit KRW74 trillion ($53.6 billion) in the quarter ending 30 June 2024, up 23 per cent year-on-year. Operating profit is estimated to increase 15-fold to KRW10.4 trillion, from KRW670 billion a year earlier.

The guidance reflects a trend among big technology companies to develop their own advanced AI models, resulting in demand for D-RAM chips. Prices of D-RAM have also risen by 13-18 per cent over the period.

The Financial Times reported, citing research company LSEG SmartEstimates, that the company’s chip division will post an operating profit of KRW5 trillion in Q2, compared to a KRW4.4 trillion loss a year earlier.

Samsung is due to launch its next line-up of devices, with a major push on AI features, at an event in Paris next week.

Industry analyst Richard Windsor described Samsung’s preliminary results as “excellent”, confirming the spending on AI is continuing apace and that it may be “a few quarters before reality catches up with the hype”.

Windsor explained that for a commodity like memory, robust demand has “almost certainly” been driven by AI which flows directly to the bottom line, giving Samsung a higher-than-expected profitability.

“This looks like it will continue in Q3 2024 as Samsung is expected to qualify as a supplier of high bandwidth memory (HBM) chips to Nvidia,” which would help it compete with rivals SK Hynix and Micron, he added.

Analysts expect Samsung to begin supplying HBM chips to Nvidia later this year. The company is however yet to pass Nvidia’s qualification tests, with CEO Jensen Huang stating last month more engineering work was needed.