Samsung Electronics is anticipated to report a more than four-fold increase in its quarterly profit on Tuesday, driven by rising demand for chips. However, the momentum of its recovery appears to be slowing, as the company struggles to capitalize on the burgeoning artificial intelligence market.

For the quarter ending September 30, operating profit for Samsung, the leading manufacturer of memory chips, smartphones, and televisions, is projected to reach 10.33 trillion won ($7.67 billion), based on an average from 29 analysts using LSEG SmartEstimate, which favors those with a track record of accuracy.

This figure represents a significant rise from 2.43 trillion won in the same period last year, yet it shows little change compared to the 10.44 trillion won reported in the previous quarter.

The global semiconductor industry is recovering from last year's downturn, primarily due to demand for chips utilized in AI servers. However, analysts note that the rebound in demand for traditional chips used in smartphones and PCs is losing steam.

The South Korean giant is working to catch up with smaller competitors SK Hynix and Micron in the race to provide high-end AI chips to Nvidia, while also facing increasing competition from Chinese firms in the commodity chip sector.

Samsung's core chip division is expected to report an operating profit of 5.5 trillion won, a significant increase from the previous year, but a decline of 15% from the last quarter, partly due to the company allocating funds for bonuses, according to estimates from 10 analysts compiled by Reuters.

Analysts suggest that Samsung's delayed entry into the lucrative AI chip market, along with its greater reliance on China and traditional mobile chips compared to its competitors, has made it more susceptible to geopolitical risks and weak demand.

"Samsung is at risk of losing its position as the top DRAM vendor if the commodity DRAM market softens," stated Daniel Kim, an analyst at Macquarie Equity Research, referring to dynamic random access memory (DRAM) chips commonly used in computers and smartphones. "The ongoing supply glut in conventional DRAM is likely to impact Samsung more severely than SK Hynix."

The pessimistic outlook follows Micron's recent announcement of first-quarter results that exceeded Wall Street expectations, alongside reporting its highest quarterly revenue in over ten years, driven by strong demand for memory chips utilized in the AI sector.

Analysts have indicated that Samsung's non-memory chip segment, which includes chip design and contract manufacturing, continued to incur losses in the third quarter as it faces challenges in competing with the market leader TSMC, which serves major clients like Apple and Nvidia.

In September, Reuters reported that Samsung is planning to reduce its overseas workforce by up to 30% in certain divisions, highlighting the difficulties the company is encountering.

Furthermore, sales of high-end foldable smartphones are expected to underperform, negatively impacting the company's profits amid rising competition from Chinese companies such as Huawei. According to estimates from ten analysts compiled by Reuters, Samsung's mobile and network divisions recorded an operating profit of 2.6 trillion won in the third quarter, a decline of 20% compared to the previous year.

Samsung Electronics' stock has dropped 23% this year, in contrast to SK Hynix, which has seen a 23% increase.

The South Korean company is set to release its preliminary third-quarter earnings on Tuesday, with full results expected later this month.