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Why Samsung’s Weak Q2 Outlook Is Alarming Tech Investors

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Samsung’s weak outlook

On Friday, Samsung Electronics (SSNLF) announced weak second-quarter guidance. The company expects its operating profit to tank nearly 56% YoY (year-over-year) in the quarter to 6.5 trillion South Korean won. Referring to the related reimbursement it received from Apple (AAPL), Samsung said its second-quarter outlook figures “include a one-time gain related to the display business.”

The South Korean tech giant also expects its revenue for the quarter to be ~56 trillion won, down 4.2% YoY.

According to Daishin Securities analyst Lee Kyoung-min, the “intensified U.S.-China war, and Japanese export curbs and signs of trade conflicts widening globally are likely to delay recovery,” as per Reuters.

Why tech investors should worry

In May, US tech companies, including chip makers Broadcom (AVGO), Micron (MU), NVIDIA (NVDA), Advanced Micro Devices (AMD), and Intel (INTC), faced the heat of the US-China trade war. The US ban on Huawei from transacting with US suppliers raised questions about the future growth of semiconductor companies, triggering a massive sell-off in tech stocks in May.

Last week, President Donald Trump met with President Xi Jinping in Japan. The leaders decided to hold off on new tariffs and continue negotiating for a trade deal. The news came as a big relief for tech companies and their investors.

However, Samsung’s weak second-quarter outlook could renew tech investors’ worries about the slowing growth in the industry.

On Friday at 3:00 PM ET, AAPL and AMD were trading with 0.2% and 0.1% gains for the day, respectively. At the same time, AVGO, MU, NVDA, and INTC were down 0.5%, 0.3%, 1.5%, and 0.9%, respectively.

US jobs data

This morning, the broader market was trading on a negative note. At 3:00 PM ET, the S&P 500 Index was trading with a fall of ~0.2% for the day after posting an all-time high of near 2,996 on Wednesday. At the same time, both the Nasdaq Composite Index and the Dow Jones Industrial Average were trading with 0.1% losses.

These losses came after the Bureau of Labor Statistics released stronger-than-expected non-farm employment data for June on Friday. According to the jobs report, about 224,000 jobs were added in the US—much higher than the expectation of 162,000 and much better than the 72,000 jobs that were added in May.

However, better-than-expected jobs data dimmed the possibility of the Fed’s cutting the interest rate in July, which hurt investors’ sentiments and drove indexes down.

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