Samsung Electronics announced on Friday, its decision to repurchase shares worth 10 trillion won or $7.17 billion, over the next year. This move aims to improve the shareholder value and stabilize the company's stock price, which recentl hit a four-year low, earlier this week.

The company will immediately repurchase and cancel 3 trillion won worth of shares- 50.14 million common shares and 6.91 million preferred shares-within the next three months. The board of directors will decide on how to allocate the remaining 7 trillion won in the program.

This is Samsung's first buyback since 2017 and is part of the company's efforts to retain investor confidence during a challenging financial period. Samsung's share price had fallen more than 20% this year. 

Samsung Electronics had reported a surge in the net profit in the third quarter 2024, but its sluggish artificial intelligence chips weighed heavily on its flagship  semiconductor business. Samsung reported a preliminary operating profit of 9.1 trillion won or $6.8 billion for the quarter ending September 30, falling short of the 10.3 trillion won forecast by LSEG SmartEstimate.

This represented a substantial year-on-year improvement of 274% from the 2.43 trillion won reported during the same period last year. The drop was primarily due to lower semiconductor demand and delayed AI chip supply to major client Nvidia.

Apart from this the memory chip sector which is constantly evolving and a key driver of Samsung's revenue, continues to remain under pressure due to falling prices and oversupply in the market. One of the reasons being the market flooded by Legacy products and the manufactures adjusting their inventory, as reported in a Reuters report.

Despite these setbacks, the buyback news triggered a positive market response. Samsung's shares surged 7.2% after the announcement, marking their largest daily gain since March 2020, as investors welcomed the move to address the company's stock price and shareholder returns.

Samsung's share buyback program represents a strategic move to reinforce investor trust and ensure the company's resilience.  However, the company has the challenge to reinvent itself and grow in the Ai Chips and semiconductor industry which is fast evolving.