SK Hynix record profit surges 557% on AI chip demand but misses forecasts amid market concerns

SK Hynix profits soar sixfold on AI boom

SK Hynix reported a more than sixfold increase in quarterly earnings, driven by demand for its advanced memory chips on the back of the AI boom. The world's second-largest memory-chip maker said on Wednesday that its operating profit surged 557 per cent to a record Won60.5tn ($42bn) in the three months to June 30 compared with the same period last year, although that was below a forecast of Won64tn by LSEG SmartEstimate. Sales rose 256 per cent to Won79.3tn ($50.7bn), also below analyst estimates of Won83.9tn. SK's shares rose about 3 per cent in morning trading as the South Korean company said it had secured multiyear contracts with about 10 customers. The stock has fallen about 47 per cent from its June peak amid growing doubts over the durability of AI spending by America's biggest tech companies. The stock had gained more than sevenfold over the past year before the recent sell-off. This is a developing story

SK hynix posts 1,200% net profit boost on AI chip boom

Seoul (AFP) - South Korea's SK hynix said Wednesday second-quarter net profit soared a whopping 1,242 percent year-on-year, driven by the artificial intelligence industry's explosive demand for its advanced memory chips. SK hynix is a specialist supplier of high-bandwidth memory chips to US industry behemoth Nvidia, and a pillar of South Korea's tech-led economy. The global race to build data centres hosting AI infrastructure has seen a meteoric rise in the firm's fortunes, despite concern the sector may be overvalued in a market bubble. Wednesday's earnings figures, including quarterly net profit of 94 trillion won ($64 billion), were described in a statement by the Icheon-headquartered firm as "an all-time high quarterly performance". "We are aware of concerns that AI infrastructure investment might be slowing down," marketing chief of the AI microchip division Park Joon-deok said on a call with investors and reporters. He cited jitters over firms exploring data centre rental -- rather than construction -- and the emergence of new high-efficiency AI requiring a lower memory taskload. "We view these developments not as a scaling back of AI investment, but rather as a process of maximising the utilisation of the massive AI infrastructure built to date and accelerating its monetisation," he said. Wednesday's report said operating profit between April and June jumped 557 percent from last year to 60 trillion won. Revenue stood at 79 trillion won, with the differential to the net profit boosted by SK hynix's one-off sale of its 20 trillion won stake in flash memory maker Kioxia -- another beneficiary of the AI boom. SK hynix said it intends to make investments in the 40 trillion won range this year. Growth was attributed to expanding investments in AI infrastructure as the technology evolves into more complex forms requiring more high-bandwidth memory capacity. "With major tech companies increasing their AI infrastructure investments, additional supply requests continue to mount," the company said in a statement. "As these investments are supported by revenue generated from AI services, the momentum in memory demand is expected to persist." Big US listing Parent firm SK Group announced on Saturday plans for a new $500 billion collaboration with Nvidia to invest in AI infrastructure. Earlier this month, SK hynix also raised $26.5 billion through an American Depositary Receipt listing in the US, one of the world's largest-ever equity offerings. Despite aggressive investments, shares of SK hynix and its larger South Korean rival Samsung Electronics have fallen sharply by 33 per cent and 41 per cent respectively over the past month. SK hynix shares tumbled 14 percent on Tuesday, the day before the earnings release. The dip has been caused by concerns about AI industry sustainability and conflict in the Middle East spooking investors, KB Securities analyst Kim Dong-won said in a note on Monday. Nonetheless, Kim forecast memory chip prices are likely to rise "at least 30 percent in the third quarter" with supply shortages likely to persist through to 2028. Samsung Electronics is due to report its quarterly earnings on Thursday. The company has forecast second-quarter operating profits to increase 1,800 per cent on last year.

SK Hynix's record profit misses forecasts; shares slump 10% despite robust AI chip demand

The Nvidia supplier's quarterly operating profit soared more than sixfold to a record high, but it said delays in shipments of some advanced products limited price gains for its mainstay dynamic random access memory (DRAM) chips. Shares in SK Hynix tumbled 10% as the weaker-than-expected earnings heightened investor concerns about the sustainability of ⁠aggressive AI spending ⁠by tech firms. South Korean chipmaker SK Hynix reported bumper quarterly results on Wednesday but fell short of lofty investor expectations fuelled by the AI boom, with the company racing to secure long-term supply deals to cushion the memory industry's volatile demand cycles. The Nvidia supplier's quarterly operating profit soared more than sixfold to a record high, but it said delays in shipments of some advanced products limited price gains for its mainstay dynamic random access memory (DRAM) chips. Shares in SK Hynix tumbled 10% as the weaker-than-expected earnings heightened investor concerns about the sustainability of ⁠aggressive AI spending ⁠by tech firms. "There are concerns that tech firms will take a breather in infrastructure spending," Lee Min-hee, an analyst at BNK Investment & Securities, said. Investor sentiment was further hurt by the company's failure to provide detailed plans for sharing the benefits of the AI boom through higher shareholder returns, analysts said. While disappointing investors, the company said memory chip demand remained strong. "Major customers are still requesting more memory supply," SK Hynix President Song Hyun-jong said on an earnings call, adding that it was seeking more long-term supply agreements to better manage chip price volatility. The move underscores how chipmakers are trying to convert today's AI-driven boom into longer-term demand certainty amid concerns that spending on AI infrastructure could eventually cool. Long-term agreements include financial safeguards such as deposits to ensure contract implementation. The company has concluded talks on around 10 such deals and is continuing discussions with other major industry players, it said. The move comes as worries about the ability of "hyperscalers" like ⁠Microsoft, Alphabet, Amazon, Meta Platforms and Oracle to fund hundreds of billions of dollars of planned investment in AI infrastructure have driven down chip shares globally in recent weeks. AI demand remains robust Despite those concerns, SK Hynix struck an optimistic note on AI memory demand, saying major technology companies continue to expand investments in AI infrastructure. "With major tech ⁠companies increasing their AI infrastructure investments, additional supply requests continue to mount," the company said. "As these investments are supported by revenue generated from AI services, the momentum in memory demand is expected to persist." While long-term deals improve visibility over future demand, they may also temper near-term pricing gains, contributing to the earnings miss, analysts said. SK Hynix also has higher exposure to high-bandwidth memory (HBM) chips, whose prices rose less than conventional memory, they said. Bigger rival Samsung Electronics has estimated a 19-fold jump in second-quarter operating profit and is due to report its results on Thursday. "Samsung has greater pricing power and has raised prices more aggressively than SK Hynix," said Lee Su-rim, an analyst at DS Investment & Securities. Reflecting its confidence in future demand, SK Hynix said it plans to raise capital spending this year to the high-40 trillion won range, up from 30.173 trillion won in 2025, to expand chip production capacity. The company downplayed concerns that its capacity expansion could lead to oversupply, saying it would adjust investments in line with market demand. Buoyed by its strong earnings, SK Hynix's net cash reached 88 trillion won at the end of June. It aims to increase that to more than 100 trillion won to better respond to customer demand and stabilise business operations. With the company's cash balance approaching its long-term target, investors are increasingly focused on how that cash will be deployed, said Kim Sunwoo, ⁠a senior analyst at Meritz Securities. SK Hynix said it could not yet provide details on the timing, size or structure of its shareholder return policy, but planned to disclose the plan later this year. "SK needs to come up with a concrete shareholder return policy to turn around investor sentiment," said Greg Roh, head of research at Hyundai Motor Securities. The company reported an operating profit of 60.5 trillion won ($41.62 billion) for the April-June period, compared with 9.2 trillion won a year earlier and short of a 64 trillion won forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate. Quarterly revenue rose 257% to 79.3 trillion won. Net profit rose more than 13-fold to 93.9 trillion won, driven in part by 63.3 trillion won in gains related to investment assets, it said, without providing further details. Analysts estimated that the company recognised cumulative investment gains following the completion last month of the sale of its stake in Japanese NAND flash memory maker Kioxia. SK Hynix invested about 4 trillion won in Kioxia in 2018 through a Bain Capital-led consortium of U.S., Japanese and South Korean investors, participating via two special purpose vehicles. ($1 = 1,453.7200 won)

SK hynix shatters Q2 earnings record amid AI peak concerns - The Korea Times

An SK hynix advertisement appears on a billboard in Times Square, New York, July 10. Courtesy of SK hynix SK hynix shattered its quarterly earnings record in the second quarter, just three months after setting its previous high. Still, its shares extended losses Wednesday as the record results failed to meet elevated market expectations, adding to concerns that the artificial intelligence (AI) infrastructure investment boom may be losing momentum -- a claim the Korean chipmaker dismissed. During its earnings call, SK hynix said its second-quarter operating profit soared 557.2 percent from a year earlier to 60.54 trillion won ($41.6 billion). Revenue for the quarter reached 79.32 trillion won, up 256.8 percent year-on-year. Both revenue and operating profit set new records, surpassing the previous highs of 52.58 trillion won in revenue and 37.6 trillion won in operating profit. Its operating margin reached 76 percent. However, the results fell short of brokerages' consensus estimates of 83.94 trillion won in revenue and 63.99 trillion won in operating profit. The company attributed the strong performance to continued demand driven by expanding AI infrastructure investment, with higher prices for high-performance AI server memories lifting earnings. Its first-half revenue exceeded 100 trillion won for the first time. "Prices for both DRAM and NAND posted sharp increases from the previous quarter," SK hynix said. "We achieved record profitability by expanding sales of high-value-added products, including high-bandwidth memory (HBM), AI server DRAM and enterprise solid-state drives." During the earnings call, the company said it is receiving growing supply requests from Big Tech companies expanding AI infrastructure investment. Based on the demand outlook, it is engaging customers on multiyear contracts and concluded negotiations on long-term agreements (LTAs) with around 10 customers, including key clients. "The standard LTA term is typically five years, but the specific terms may vary depending on the customer and the product," the company said. "Rather than adopting a single pricing model, we are discussing various pricing structures with customers to help address price volatility." To reduce earnings volatility tied to the memory cycle, SK hynix and other memory chipmakers have been expanding LTAs. Despite those efforts, investors remain haunted by the worry that a slowdown in AI infrastructure investment could eventually lead to an oversupply of memory chips. SK hynix shares fell 9.48 percent before noon Wednesday, following a 14.65 percent drop in the previous session. Excluding Wednesday's decline, the stock has suffered four single-day losses of more than 10 percent this month. "We believe the industry is moving into a stage of improving utilization and accelerating the monetization of the infrastructure that has already been built, rather than entering a phase of reduced AI investment," the company said. "As our capacity expansion will remain flexible, we believe the likelihood of mid- to long-term investment immediately leading to an oversupply is limited." The company said it is considering additional shareholder return measures and plans to disclose them to the market later this year. It also said that its American depositary receipts listed in the United States can be converted into common shares beginning Thursday. The company began mass shipments of HBM4 in the second quarter and plans to significantly ramp up production in the second half. It has also completed the sample deliveries of the next-generation HBM4E in the first half and plans to start mass production next year. SK hynix said it expects overall shipment growth in the second half to outpace that of the first half, driven by a significant increase in HBM4 shipments and higher shipments of conventional DRAM based on its sixth-generation 10-nanometer-class process. "A higher proportion of HBM4 and other high-value-added products in our sales mix will contribute positively," the company said. "As a result, we expect our earnings momentum to strengthen further in the second half, supported by both higher shipment volumes and rising average selling prices." Regarding its NAND business, the company said its 321-layer NAND products already account for the largest share of its total production, and it plans to expand their share to about 50 percent of its domestic production capacity by the end of the year. To meet growing demand, SK hynix said it has accelerated the production schedule for its M15X fab while investing to rapidly expand capacity. It said its mid- to long-term investment plans, including the recently announced P&T7 advanced packaging facility, the M17 NAND production base and the new semiconductor cluster, will be carried out in phases based on customer demand and investment efficiency.

SK Hynix posts sixfold rise in Q2 profit on AI chip demand, misses forecasts

SEOUL, July 29 (Reuters) - South Korean chipmaker SK Hynix reported a more than sixfold increase in quarterly operating profit to a record high on Wednesday, driven by robust demand for advanced memory chips as big technology firms ramped up spending on AI data centres. The Nvidia supplier reported an operating profit of 60.5 trillion won ($41.62 billion) for the April-June period, compared with 9.2 trillion won a year earlier. But it missed a 64 trillion won forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate. "Driven by sustained demand growth from expanding AI infrastructure investments, high-performance products for AI servers led price increases, enabling the company to surpass its previous record set in the prior quarter," SK Hynix said in a statement. SK Hynix missed analysts' forecasts because its higher exposure to high-end memory chips used in AI data centres than rivals meant it benefited less from a stronger price rally in conventional memory chips. The company said its quarterly revenue rose 257% to 79.3 trillion won. ($1 = 1,453.7200 won) (Reporting by Heekyong Yang and Joyce Lee; Editing by Jamie Freed)