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Analysts predict that HBMs could account for 20 per cent of SK Hynix’s profit from DRAM chips by the end of 2024, a significant increase from almost 0 per cent in the first half of 2023 read more
 "NVIDIA supplier SK Hynix profits skyrocket thanks to AI boom, increased DRAM demand")
In May, SK Hynix CEO Kwak Noh-Jung announced that their HBM chips were sold out for this year and nearly sold out for 2025, reflecting the strong market demand. Image Credit: Reuters
South Korea’s SK Hynix, a key supplier to NVIDIA, has reported its highest quarterly profit since 2018, thanks to a surge in demand for AI chips. Despite this achievement, the company’s shares fell by up to 8.4 per cent during morning trade, mirroring declines in US tech stocks like NVIDIA, as investor expectations remained unmet.
The company, which is the second-largest memory chip maker globally, has been a significant beneficiary of the growing demand for high-end chips and enterprise solid-state drives (eSSDs), especially driven by advancements in artificial intelligence. SK Hynix’s strategic early entry and substantial investment in these segments have positioned it well in the market.
For the April-June quarter, SK Hynix reported an operating profit of 5.47 trillion won ($3.96 billion), marking a substantial turnaround from a loss of 2.9 trillion won in the same period last year. This profit aligns with the LSEG SmartEstimate, which factors in analysts’ consistency. The company’s revenue also saw a remarkable 125 per cent increase, reaching a record 16.4 trillion won.
Surge in demand for AI
The surge in demand for high-end DRAM chips like High Bandwidth Memory (HBM), which are crucial for data centre servers and devices running on-device AI services, has significantly boosted SK Hynix’s performance. CFO Kim Woohyun noted that DRAM prices are rising despite a lack of full recovery in traditional buyer demand, as chipmakers focus their production on HBM.
SK Hynix leads the HBM market, supplying these chips to NVIDIA and competing with other industry giants like Samsung Electronics and the US-based Micron. NVIDIA currently dominates approximately 80 per cent of the AI chip market.
In March, SK Hynix began mass production of its fifth-generation HBM chips, known as HBM3E, with initial shipments going to NVIDIA. The company has ambitious plans to roll out the next versions of HBM chips, including the 12-layer HBM3E in the fourth quarter and the HBM4 in the second half of 2025. In contrast, Samsung is still working to meet NVIDIA’s standards for HBM3E chips but has had its fourth-generation HBM, HBM3, approved for use in NVIDIA’s less sophisticated graphics processors, designed for the Chinese market.
Future prospects and challenges
Speaking to Reuters, Analyst Lee Min-hee from BNK Investment & Securities highlighted that while SK Hynix aims to maintain its technical leadership and stay ahead of competitors, the high investor expectations might be challenging to meet, which could affect short-term stock price movements.
Analysts predict that HBMs could account for 20 per cent of SK Hynix’s profit from DRAM chips by the end of 2024, a significant increase from almost 0 per cent in the first half of 2023. This growth is anticipated as NVIDIA accelerates its plans for next-generation graphics processors to keep up with the booming demand driven by generative AI.
In May, SK Hynix CEO Kwak Noh-Jung announced that their HBM chips were sold out for this year and nearly sold out for 2025, reflecting the strong market demand.
SK Hynix has been one of South Korea’s top stock picks amid the AI boom, with its shares rising 47 per cent year-to-date as of Wednesday. Despite the recent drop in share prices, the company’s robust performance and strategic advancements in AI technology signal a promising future in the rapidly evolving semiconductor industry.
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English (US) ·