South Korea's SK Hynix announced its highest quarterly profit since 2018 on Thursday, driven by robust demand for AI chips, specifically high bandwidth memory (HBM) used in generative AI chipsets. The company's operating profit for April to June reached 5.47 trillion won ($3.96 billion), marking a significant turnaround from a loss of 2.9 trillion won a year earlier.
Head of DRAM Marketing, Kim Kyu Hyun, highlighted the growing demand for AI technology during an earnings call, stating, "AI demand continues to grow above expectations... We expect next year's HBM shipments to more than double this year's." Despite this positive outlook, SK Hynix shares dropped by as much as 8.4% in morning trade, mirroring declines in U.S. tech shares, including Nvidia, as tech firms' results did not meet the lofty expectations of investors.
SK Hynix, the world's second-largest memory chip maker, has reaped substantial benefits from the AI-driven demand for high-end chips and enterprise solid-state drives (eSSDs). This success is attributed to its early entry and significant investment in these segments. The company's revenue soared 125% to a record 16.4 trillion won, bolstered by explosive demand for high-end DRAM chips like HBM, essential for data center servers and devices running on-device AI services.
CFO Kim Woohyun noted the impact of this demand, saying, "DRAM prices are rising despite the lack of complete recovery in traditional buyer demand, as chipmakers concentrate production capacity on HBM." SK Hynix leads the HBM market and is a primary supplier to Nvidia, competing with Samsung Electronics and the United States' Micron. Nvidia, which commands approximately 80% of the AI chip market, received initial shipments of SK Hynix's fifth-generation HBM chips, HBM3E, which began mass production in March.
The chipmaker revealed plans to ship the 12-layer HBM3E chips starting in the fourth quarter and the HBM4 in the second half of 2025. While Samsung has yet to meet Nvidia's standards for HBM3E chips, it has received clearance for its fourth-generation HBM, HBM3, for use in Nvidia's less-sophisticated graphics processors developed for the Chinese market.
Analyst Lee Min-hee from BNK Investment & Securities remarked on SK Hynix's position, stating, "SK Hynix is saying it will keep its technical leadership, stay ahead of competitors. But investor expectations are so high they may be hard to meet, and in the short term, the stock price may not rise as much."
Analysts project that HBMs could account for 20% of SK Hynix's profit for DRAM chips by the end of 2024, up from nearly 0% in the first half of 2023, as Nvidia accelerates plans for next-generation graphics processors to meet the soaring demand fueled by the generative AI boom. SK Hynix CEO Kwak Noh-Jung stated in May that their HBM chips were sold out for this year and nearly sold out for 2025.
SK Hynix shares have risen 47% year-to-date as of Wednesday, making it one of South Korea's top stock picks amid the AI boom.
