Samsung sinks as report shows more work needed on HBM chips for Nvidia

Investing.com-- Shares of memory chips maker Samsung Electronics sank on Friday after Reuters reported that the company’s newest high bandwidth memory (HBM) chips were yet to pass Nvidia’s tests for use in artificial intelligence processors. 

Samsung Electronics Co Ltd (KS:005930) fell 2.3% to 76,500 won, a one-month low. Losses in the stock spurred a nearly 1% decline in South Korea’s benchmark KOSPI index. 

Reuters reported that Samsung’s HBM and HBM3E chips- which are the firm’s most advanced chips and are intended for use in AI processing units- were still not meeting NVIDIA Corporation's (NASDAQ:NVDA) standards due to problems with heating and power consumption. 

The report shows a potential delay in Samsung’s ambitions to capitalize on demand from the fast-growing AI industry, and could see the company falling behind rival SK Hynix Inc (KS:000660), which is currently the only supplier of advanced HBM3E chips in the market. 

Meeting Nvidia's requirements has become paramount for contract chipmakers such as Samsung, given that the U.S. firm commands over 80% of the market for advanced AI processors. Nvidia also currently makes the most advanced AI processors available in the market.

U.S. rival Micron Technology Inc (NASDAQ:MU) also recently said it will begin production of advanced HBM chips, demand for which is set to grow sharply amid increased AI development. 

Samsung is the world’s biggest memory chip maker by volume. While the firm did benefit from increased AI-driven demand in recent quarters, this trend could change if it loses out market share in the advanced HBM sector to rivals such as Micron and SK Hynix.