Nvidia supplier SK Hynix posts highest profit in 6 years on AI boom but shares tumble
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SK Hynix remains one of the main beneficiaries of a race to supply components essential to creating generative AI services.
PHOTO: BLOOMBERG
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SEOUL – Shares of SK Hynix tumbled on July 25 after a rout in tech stocks, overwhelming solid financial results for the supplier to Nvidia in the April to June quarter.
The company, which supplies chips that train artificial intelligence (AI) models, reported sales more than doubled to 16.4 trillion won (S$15.9 billion) as revenue for its high-bandwidth memory chips surged more than 250 per cent.
Operating profit rose to 5.47 trillion won – its highest since 2018 – helped by a rise in overall prices of Dram and Nand chips.
But its shares fell as much as 6.7 per cent, the biggest intra-day fall since April 19, as investors soured on the promise of AI. The shares ended 8.87 per cent lower on July 25.
The company said capital expenditure in 2024 would likely top earlier plans to keep up with a boom in spending on AI hardware.
It also said it will mass produce its next-generation 12-layer HBM3E chips this quarter, widening its lead over rivals Samsung Electronics and Micron Technology in designing and supplying the high-end memory that powers Nvidia’s AI accelerators. HBM3E products would make up about half the volume of all its HBM chips in 2024, it said.
SK Hynix’s report may assuage growing concerns that AI spending will begin to decelerate as US curbs on supplying China take hold, while the frenetic pace of data centre investments slows.
This week, Morgan Stanley cut AI chip-sector stocks including SK Hynix and Taiwan Semiconductor Manufacturing Co from its focus lists, warning that it may be time to take a breather. US tech stocks went into a tailspin overnight as investors soured on the promise of AI
SK Hynix remains one of the main beneficiaries of a race to supply components essential to creating ChatGPT-like generative AI services. The South Korean company revealed in May that its capacity to make high-bandwidth memory chips was almost fully booked in 2025, reflecting a widening lead over Samsung.
That helped power a 47 per cent gain in SK Hynix from the start of 2024 to the July 24 close, a rally mirrored by many of the AI sector’s emerging new leaders. But that global stock boom wobbled last week after investors reassessed the potential for further gains amid looming central bank policy shifts and the US presidential election.
Some analysts warned that the hype over untested AI applications was driving outsized market gains with AI technology yet to reach its full potential.
“We are not calling for the ‘end of the cycle’ – but with all the focus on shortages and talk of a new AI paradigm, it is important not to lose sight of the normal, cyclical nature of the semiconductor market,” Morgan Stanley analysts, including Mr Shawn Kim and Mr Charlie Chan, wrote in a separate report.
For the long run, SK Hynix is earmarking some US$15 billion (S$20 billion) in South Korea to meet surging demand for high-end chips, on top of a plan to spend US$3.9 billion on an advanced packaging plant and research centre for AI products in Indiana. BLOOMBERG
