Why is Samsung planning a record $80B payout after SK Hynix’s giant buyback?

Samsung Electronics said Friday that shareholder returns could reach as much as 110 trillion won, or roughly $80 billion, in 2026 as the AI-memory boom generates a cash windfall across South Korea’s chip industry.

The potential payout, around five times Samsung’s previous annual record, follows SK Hynix’s decision to buy back and cancel 40 trillion won of shares.

Both companies are signalling that record AI profits can fund aggressive investment while still leaving enormous sums for investors.

Samsung’s existing 2024-2026 policy calls for returning 50% of free cash flow, including 9.8 trillion won of regular annual dividends. Surging memory earnings have made that formula far more powerful.

AI memory has left Samsung with an unusual cash problem

“Samsung Electronics’ free cash flow is rising rapidly thanks to the AI memory boom,” KB Securities research head Kim Dong-won told Financial News.

He argued that future valuation gains could increasingly depend on how management distributes that cash, rather than earnings growth alone.

Crucially, Samsung is not starving its factories to fund shareholders.

The company said in March that it planned to spend more than 110 trillion won on facilities and research and development in 2026, including investments intended to strengthen its position in HBM and other advanced semiconductor technologies.

That combination separates the current cycle from a conventional cash-return story.

Samsung believes it can keep spending at an extraordinary pace while still producing enough free cash flow to support a record payout.

SK Hynix’s giant buyback raises the shareholder-return bar

The company approved a 40 trillion won repurchase covering about 24.1 million shares, equivalent to roughly 3.3% of shares outstanding.

Every repurchased share will be cancelled. It also raised its policy from returning within 50% of cumulative 2025-2027 free cash flow to returning at least 50%.

Barclays analyst Simon Coles called the programme a “strong signal” that the shares remain undervalued.

Barclays estimates SK Hynix could return an amount equivalent to about 15% of its market capitalisation while retaining enough financial capacity to expand production and pursue new opportunities.

That is important for Samsung, as investors increasingly expect Korea’s memory leaders to convert extraordinary sector profits into per-share value, rather than allowing cash simply to accumulate on their balance sheets.

The pressure has intensified after sharp corrections in both stocks from their June highs despite record earnings.

Payouts are also a bet that memory profits will last

Samsung Securities analyst Lee Kyung-bin said SK Hynix’s shareholder return was a signal of management confidence in the sustainability of earnings and a catalyst highlighting upside for the stock, according to Yonhap.

Confidence rests on scarcity.

KB Securities’ Kim told Seoul Economic Daily that major technology customers are receiving only about 60% of the memory they require.

Because constructing a new memory fabrication plant takes more than three years, he expects shortages to persist for at least that long.

That provides room for Samsung and SK Hynix to keep investing heavily without immediately eliminating the scarcity supporting prices and margins.

The risk is familiar. Memory remains cyclical, and aggressive industry capacity additions could eventually weaken pricing if AI spending slows or supply catches up faster than expected.

The payouts suggest management teams see enough visibility to commit unprecedented cash without sacrificing expansion.