SK Hynix Inc. recently announced record quarterly operating profits, exceeding $5.6 billion, a more than twentyfold increase year-over-year, and surpassing competitor Samsung Electronics Co. for the first time. Despite this success, driven by booming demand for high-bandwidth memory (HBM) crucial for AI applications, SK Hynix shares dipped over 2% following the announcement. This reflects ongoing investor anxieties surrounding sluggish smartphone sales and uncertainty about sustained AI investment into 2025.
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HBM Demand Fuels Growth Amidst Market Uncertainty
The significant profit jump highlights the global surge in datacenter spending and solidifies SK Hynix’s leading position in HBM chips, essential for Nvidia’s AI accelerators. The company’s performance may alleviate concerns about a potential slowdown in AI-driven spending by major tech players like Microsoft, Meta, and others.
Recent news of the $100 billion Stargate project, a venture backed by SoftBank, OpenAI, Oracle, and MGX to develop and finance datacenters, has further invigorated the sector. This initiative, championed by former President Donald Trump, has sparked a rally in companies like Nvidia and Arm Holdings, driven by expectations of significant datacenter infrastructure growth.
SK Hynix: Poised for Continued HBM Dominance
SK Hynix projects that HBM sales will more than double in the current year and has increased its annual dividend by 25%. Analysts, such as Sanjeev Rana of CLSA Securities Korea, believe SK Hynix is uniquely positioned to benefit from projects like Stargate due to its superior product quality and production yields. He suggests competitors face a significant challenge in catching up.
Maintaining its lead over Samsung and Micron Technology in HBM design and supply, SK Hynix plans to launch advanced 16-layer HBM4 chips in the latter half of 2026. With HBM contributing 40% of its DRAM revenue in the last quarter, the company expects continued growth in demand for high-end memory as AI server investments and inference capabilities expand.
Navigating Challenges in Traditional Markets
While smartphone demand, including for Apple’s iPhone, remains subdued, SK Hynix anticipates a second-half recovery driven by increasing sales of PCs and AI-enabled devices. The company is betting that burgeoning AI demand will offset weakness in traditional memory markets.
SK Group Chairman Chey Tae-won confirmed accelerated development efforts to meet Nvidia’s requirements. During a recent meeting at CES in Las Vegas, Chairman Chey and Nvidia co-founder Jensen Huang discussed strategies to strengthen their partnership. Further demonstrating commitment to this sector, SK Hynix is investing heavily in South Korea and the United States to expand production capacity and research capabilities for high-end and AI-focused chips.
Competition and Future Outlook
Samsung aims to mass-produce HBM4 chips in the second half of 2025, striving to close the gap with SK Hynix. Samsung recently unveiled its Galaxy S25, highlighting enhanced AI functionalities.
Analysts at Bloomberg Intelligence suggest that while SK Hynix’s first-quarter sales may experience a sequential decline, year-over-year growth will likely remain robust, fueled by ongoing HBM demand. However, potential seasonal weakness in non-AI applications could impact NAND sales in the first quarter.
Despite current market uncertainties, SK Hynix’s strategic focus on HBM and significant investments in advanced chip technologies position the company for continued growth within the rapidly evolving AI landscape. The company’s ability to navigate challenges in traditional markets and maintain its technological edge will be crucial for sustained success.
