SK hynix delivered a record-breaking quarterly earnings report this Wednesday, but its stock price initially plunged nearly 20% before recovering to close down 9.6%. This stark contrast highlights how investor expectations for AI chip stocks have soared to extreme levels, where any signal falling short of the most optimistic forecasts can trigger a sharp selloff.
The earnings report showed SK hynix posted a net profit of 93.9 trillion won (approximately $64 billion) over three months, a 13-fold increase year-on-year, surpassing the company's total net profit over the past five years. This performance was driven by robust demand for high-bandwidth memory used in AI systems. The company's market value in South Korea surpassed $1 trillion in late May, and it listed on the Nasdaq exchange in the US on July 10, raising over $26 billion. However, some investors had even more aggressive expectations, and the record profit was interpreted as a "sell the news" event.
On the same day, the SK Group announced a $500 billion partnership with Nvidia, covering next-generation memory supply and AI data center construction. Shares of Japanese flash memory maker Kioxia and South Korea's Samsung Electronics also weakened. Samsung Electronics subsequently reported a second-quarter net profit of $48.6 billion on Thursday, a 14-fold increase year-on-year, and signaled to investors during an earnings call that it has secured long-term agreements with major data center clients, with orders covering multiple years.
Data center operations require large amounts of memory chips to train and run AI systems, and most analysts expect demand to continue rising. Shares of the three major memory chip makers—SK hynix, Samsung Electronics, and US-based Micron Technology—have benefited accordingly. SK hynix, in particular, has been favored by the market due to its technological edge in high-bandwidth memory. Last month, SK hynix and Samsung announced plans to invest a combined total of over $500 billion in a new chip manufacturing base in southwestern South Korea. The four major US tech giants—Microsoft, Meta, Amazon, and Google—are expected to spend a combined total of up to $670 billion on AI-related capital expenditures this year.
Despite strong fundamentals, concerns are mounting about the sustainability of the AI boom. One issue drawing attention is the practice of chipmakers using circular financing arrangements to help customers purchase more chips. A semiconductor analyst at South Korea's Mirae Asset Securities noted that the SK hynix stock price fluctuation is an "excessive correction disconnected from fundamentals," emphasizing that orders from clients like Google and rising spot prices for memory chips both indicate the industry's momentum is intact and supply remains tight. Japan's Nomura Securities predicts that DRAM chip revenue will exceed $2 trillion by 2030, a roughly 12-fold increase from 2025.