Samsung Electronics on Tuesday blamed U.S. sanctions on advanced AI chip exports to China for a sharp drop in second-quarter profit, a move that rattled investors and sent its shares slightly lower.

The South Korean tech giant, the world’s largest memory chipmaker, projected a 56% plunge in operating profit for the April–June quarter, attributing the downturn primarily to the impact of Washington’s restrictions on AI-related chip sales. The company said the sanctions disrupted supply chains and led to inventory adjustments, particularly in its foundry and chip divisions.

Samsung’s shares slipped 0.2% following the announcement, underperforming the broader KOSPI index, which rose 1.2% in morning trading.

While Samsung cited U.S. export controls as a major headwind, analysts noted that internal delays in supplying high-bandwidth memory chips to Nvidia may have also contributed to the earnings miss. The company had previously indicated its HBM3E 12-layer chips would be ready by mid-year but offered no update on shipments to Nvidia.

“Samsung is pointing to the sanctions, but the underlying issue remains its struggle to catch up in the AI chip race,” said Ryu Young-ho, senior analyst at NH Investment & Securities. “Its competitiveness in HBM is still in question.”

In total, Samsung expects operating profit of 4.6 trillion won ($3.36 billion) for the quarter, far below analyst forecasts of 6.2 trillion won. Revenue is projected to be flat year-on-year at 74 trillion won. The chip division’s profit may fall over 90% to about 500 billion won, according to analyst estimates.

The company said it would continue shipping improved HBM products, which are currently undergoing customer evaluations, and expects gradual recovery in its chip and foundry businesses in the second half of the year.

Samsung plans to release full earnings on July 31.