South Korea’s SK Hynix reported its highest quarterly profit since 2018, thanks to strong demand for AI chips, especially high bandwidth memory (HBM) used in generative AI chipsets. “AI demand continues to grow above expectations. We expect next year’s HBM shipments to more than double this year’s,” said Kim Kyu Hyun, Head of DRAM Marketing.
Despite the positive news, SK Hynix shares dropped by 8.4% in morning trade, reflecting declines in U.S. tech stocks like Nvidia, as investors’ high expectations were not fully met. SK Hynix, the world’s second-largest memory chip maker, saw its operating profit for April-June reach 5.47 trillion won ($3.96 billion), compared to a loss of 2.9 trillion won a year earlier. Revenue rose by 125% to a record 16.4 trillion won.
The company has benefited significantly from the AI-driven demand for high-end chips and enterprise solid-state drives (eSSDs), due to its early investments in these areas. “DRAM prices are rising as chipmakers focus on HBM production,” said CFO Kim Woohyun. SK Hynix is a leading supplier of HBM chips to Nvidia, competing with Samsung Electronics and the U.S.’s Micron.
SK Hynix began mass production of fifth-generation HBM chips, called HBM3E, in March, with initial shipments going to Nvidia. The company plans to ship the next versions, the 12-layer HBM3E in the fourth quarter and the HBM4 in the second half of 2025.
Samsung has not yet met Nvidia’s standards for HBM3E chips but has received approval for its fourth-generation HBM3 chips for use in Nvidia’s less-sophisticated graphics processors developed for the Chinese market.
“SK Hynix aims to maintain its technical leadership,” said analyst Lee Min-hee at BNK Investment & Securities. However, high investor expectations may limit short-term stock price increases. Analysts predict that HBMs could account for 20% of SK Hynix’s DRAM chip profit by the end of 2024, up from almost 0% in the first half of 2023, as Nvidia accelerates its plans for next-generation graphics processors due to AI demand.
In May, SK Hynix CEO Kwak Noh-Jung stated that HBM chips were sold out for this year and almost 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 for the AI boom.
