Shares of Samsung Electronics Co. (KOSPI:530036) surged over 6% on rumors that the company has secured the right to supply advanced memory chips to AI leader Nvidia Corp. (NASDAQ:NVDA).
South Korea’s largest electronics company will begin supplying the HBM3 chip – a newer generation of memory optimized for working with AI accelerators – starting in the fourth quarter, wrote Citigroup analysts, including Peter Lee, in a report. Its shares recorded the biggest increase since January 2021. Arch-rival SK Hynix Inc. has been the sole supplier of high-bandwidth memory to Nvidia’s AI accelerators so far.
“After successfully entering Nvidia’s HBM supply chain, we expect Samsung to emerge as a major HBM3 supplier,” wrote Lee and Josh Yang in a report that raised Citigroup’s price target for Samsung to 120,000 won from 110,000 won. “We view Samsung as a long-term beneficiary of the growth in the memory and AI computing market.”
Samsung closed the deal to supply HBM3 to Nvidia when its chips passed the final quality test of the US chip designer, reported the Korea Economic Daily on Friday, citing unidentified industry sources. According to the report, Samsung will begin supplying the key memory chips next month.
Nvidia would benefit from having Samsung as an additional HBM3 supplier. The Santa Clara, California-based company, whose shares tripled this year, reaching a market value of $1.2 billion, could gain cost or yield improvements and a more stable supply by expanding its options.
Samsung’s suppliers also traded higher on the news, with Hana Micron Inc., a chip testing and packaging company, rising by the daily limit of 30%. Daeduck Electronics Co., a printed circuit board supplier, rose by 7.4%.
Hynix is the global leader in HBM3, which experts say is well-suited for AI services that require high bandwidth. Samsung has announced plans to release a new HBM chip later this year. Hynix’s shares fell 1.5% after an initial rise in Friday’s session.