What happened
Shares of Nvidia (NVDA 6.18%) and Advanced Micro Devices (AMD 2.37%) popped on Thursday after Samsung Electronics provided earnings guidance that was better than many investors expected.
As of 3:10 p.m. ET, the chipmakers' stock prices were up 4.9% and 5.6%, respectively.
So what
The prices of many chip stocks are down sharply in 2022. Supply chain shortages have slowed chip production schedules, while rising costs have dented chipmakers' profit margins.
Nvidia's and AMD's stock prices haven't been spared from the carnage. The semiconductor leaders' shares are both down more than 40% so far this year.
Yet Samsung's guidance gave tech investors hope that some of the industry's challenges might be abating. The South Korean chip titan said it expects its revenue to grow by roughly 21% year over year to 77 trillion Korean won ($59 billion) in the second quarter. The company also projected that its operating profits would increase by about 11% to 14 trillion Korean won ($11 billion). Those figures were better than several analysts predicted.
Now what
The news also suggests that demand for chips may be stronger than many investors thought. After rising sharply during the early stages of the pandemic, sales of laptops and smartphones are widely expected to slow. But sales of chips used in data centers are projected to remain robust as more companies shift their operations to the cloud. These cloud-related sales should help to support Nvidia's and AMD's growth.
Additionally, Samsung's upbeat guidance could indicate that supply chain constraints are easing. That would allow chipmakers to produce more of their products that remain in high demand.
