Samsung Electronics – Confirmation

The shares are still attractive

• The notoriously leaky Korean market has let the wider world know that Samsung has qualified with Nvidia for HMB4, has purchase orders and will begin volume shipments by the end of this month.
• This news, courtesy of Yonhap (see here), goes on to strongly infer that Samsung is one of the launch partners for Vera Rubin, which Nvidia has said is already in production and is expected to start appearing in data centres sometime in Q2 or Q3 this year.
• Furthermore, the news that hyperscaler spending on capex is going bananas in 2026, means that demand for high bandwidth memory will be even stronger than anticipated.
• This, in turn, means that even with Samsung returning to supplying the market, there will still not nearly be enough to go around, meaning that both prices and volume will remain robust.
• This is a dream scenario for all of the memory makers who are currently enjoying the strongest demand and tightest supply for many years.
• Given that it will take quite some time to bring new fabs online to meet the demand, this situation is likely to persist for at least 2026.
• Memory makers are sold out for 2026 and are already looking at preselling 2027 on a firm order basis (high penalties for cancellation), meaning that the party is not yet over.
• This means that they, like Nvidia, have very good visibility for the next 12 months, which gives me the confidence to think that 2026 is going to be another record year.
• There will come a time when demand ameliorates (even the hyperscalers can’t keep this level of capex going), the new fabs come online, and there will be a collapse in revenues and profits, but this time is not yet here.
• The consensus estimates for Micron and SK Hynix call for at least a tripling of earnings in 2026 compared to 2025, and now Samsung’s estimates are starting to move in that direction also.
• This means that my KRW7,777 estimate for 2026 is much too low, especially as Samsung is expected to earn KRW4,410 in the first quarter alone.
• Consensus has Samsung earning an all-time record of KRW20,200 in 2026 and growing again in 2026 to KRW23,690.
• This puts Samsung on 8.3x 2026 PER and 7.1x 2027, meaning that the shares have further to run, even though they have already done extremely well since I first bought just under 12 months ago.
• I bought the shares on the basis that it would qualify for HBM4 and that the shares would rerate back to where they were, which has now happened, raising the question of whether it is time to sell.
• However, what I have underestimated is the level of demand that is out there for memory.
• This means that both my numbers and my valuation for Samsung need to rise, meaning that I am not selling the position yet.