Samsung Electronics announced on Tuesday that it expects to achieve its largest quarterly profit in over three years, driven by global competition to increase AI chip production which has tightened supply and raised prices for traditional memory chips, a core pillar for the tech giant.

Analysts noted that strong demand for traditional memory chips used in AI servers helped offset weaker sales of Samsung’s advanced AI chips, where it lagged competitors in the supply race to Nvidia.

The memory chip maker estimated operating profit of 12.1 trillion won (US$8.5 billion) for the July to September period, a 32% increase from the previous year and well above the 10.1 trillion won forecast by the “London market.” This represents its best quarterly profit in 13 quarters.

Following the announcement, Samsung shares rose 2.9% to 96,000 won, their highest level since January 2021, achieving gains of 79% so far this year.

Ryu Young-ho, chief analyst at NH Investment & Securities, said, “The third-quarter profit surprise came from the chip sector.”

Although progress in supplying advanced high-bandwidth memory (HBM) chips to key clients like Nvidia was slower than expected, gains in the memory chip sector, supported by limited supply, helped cushion the impact, analysts said. Son In-joon, an analyst at HyungKook Securities, said, “Samsung is benefiting greatly from the increasing demand for electronic chips.”

Son attributed the profit outperformance to higher-than-expected prices for DRAM and NAND chips, driven by demand for AI data center servers and lower chip inventories among chipmakers, giving Samsung pricing power.

Analysts also pointed out that Samsung benefited from reduced losses in its foundry unit, which manufactures logic chips, where operating rates helped ease fixed cost pressures.

The company added that revenue is likely to rise 8.7% to a record 86 trillion won compared to the previous year, also supported by a weaker South Korean won. Samsung is expected to release detailed financial results, including profit breakdowns by business segment, on October 30.

Analysts noted that memory makers’ focus on investing in advanced chips in recent years may have limited traditional chip production, extending supply shortages and driving up traditional chip prices.

Prices for some dynamic random-access memory (DRAM) chips, widely used in servers, smartphones, and computers, jumped 171.8% in Q3 compared to the previous year, according to TrendForce data.

Analysts expect core memory supply shortages to continue until 2026.

Following OpenAI’s success with ChatGPT, major tech companies have laid out long-term plans to expand AI-related investments, including data centers and servers capable of handling increasing AI workloads.

While recent chip supply deals with major tech firms like Tesla and OpenAI eased investor concerns about Samsung, analysts warned of ongoing uncertainties including potential U.S. tariffs that could hurt chip demand, escalating U.S.-China trade tensions, and China’s tightening export controls on rare earth materials used in advanced chips and manufacturing equipment.

Samsung has been the world’s largest memory chip maker for three decades but faces growing competition in advanced AI chips after losing its top market share in DRAM to SK Hynix in Q1 this year.

Competitors SK Hynix and Micron have benefited from strong AI-driven memory chip demand, while Samsung’s exposure to China, where the U.S. imposes restrictions on advanced chip sales, may have limited its growth.

Analysts expect Samsung’s HBM chip sales to gradually improve after the company made tangible progress supplying the latest 12-layer HBM3E chips to Nvidia following delays in recent quarters, although some say shipment volumes remain limited. Samsung is betting on next-generation HBM4 products to close the gap with SK Hynix. Morgan Stanley reported that Samsung is on track to develop the next generation of HBM4 in close collaboration with major U.S. clients. Commercial shipments and sales contributions are expected to begin in 2026.