Samsung Electronics shares fell sharply on Tuesday even after the company delivered one of the strongest earnings updates in the AI chip cycle.

The company forecast second quarter consolidated sales of about 171 trillion won and operating profit of about 89.4 trillion won, according to Samsung’s preliminary guidance. The figure compares with operating profit of 4.6 trillion won in the same quarter last year, marking a roughly 19 fold increase.  

Samsung’s results also beat market expectations. Reuters reported that the operating profit estimate topped an LSEG SmartEstimate of 87.3 trillion won, while revenue was expected to rise 129% from a year earlier.  

The stock reaction went the other way. Samsung shares fell as much as 10.1% and ended down 6.9%, while rival SK Hynix dropped 6%, dragging South Korea’s Kospi lower.  

The move showed how little margin for error remains in the AI trade. Samsung’s business is clearly benefiting from demand for memory chips used in artificial intelligence infrastructure, but investors had already priced in a powerful rebound.

The same pattern spread across the chip sector. Investor’s Business Daily reported that the Philadelphia Semiconductor Index fell more than 5%, with Micron, TSMC, Nvidia, AMD, Broadcom and Marvell also trading lower after Samsung’s update.  

The pressure reflects a broader concern that AI related equities have become too crowded. Samsung’s guidance confirmed that AI demand remains strong, but it did not resolve questions around future supply, margins and whether the industry is building capacity faster than demand can absorb it.

The Financial Times reported that Samsung’s selloff came despite a third consecutive quarter of record operating profit, with investors focused on potential overexpansion and returns from AI spending. The decline also pulled other memory names lower, including SK Hynix and Kioxia.