SK Hynix Inc., a major supplier of memory chips, has announced record quarterly earnings. However, investors have reacted cautiously. Concerns about smartphone demand and future AI spending have tempered enthusiasm. Despite reporting record profits, Nvidia Partner SK Hynix’s profit fails to impress AI chip bulls, who remain concerned about future demand and competition.
The company reported a significant increase in operating profit for the December quarter. Profit jumped more than 20 times to 8.08 trillion won ($5.6 billion). This performance surpassed that of rival Samsung Electronics Co. for the first time. Despite this impressive result, SK Hynix stock fell by over 2%. Investors appear to be taking profits after a 30% surge in the company’s share price this year.
SK Hynix’s strong growth reflects the surge in global data center spending. The company is a key player in high-bandwidth memory (HBM) chips. These chips are essential for Nvidia’s AI accelerators. The results also suggest that AI-driven spending by major tech companies may not have peaked.
This week’s announcement of the “Stargate” project further supports this view. This $100 billion venture involves SoftBank, OpenAI, Oracle, and MGX.
HBM Demand Drives Growth, Despite Smartphone Slowdown
SK Hynix expects HBM sales to more than double this year. The company has also increased its annual dividend by 25%. Analysts believe SK Hynix will greatly benefit from the Stargate project. They cite the company’s leading position in HBM technology. Even with the surge in demand for HBM chips used in AI, Nvidia Partner SK Hynix’s profit fails to impress AI chip bulls focused on long-term growth prospects.
SK Hynix is ahead of competitors like Samsung and Micron in HBM development and supply. The company plans to ship advanced 16-layer HBM4 chips in the second half of 2026. To maintain its lead, SK Hynix plans to slightly increase capital spending this year.
HBM accounted for 40% of SK Hynix’s total DRAM chip revenue in the last quarter. The company anticipates continued growth in demand for these high-end memory chips. This growth will be driven by investments in AI servers and the increasing importance of AI inference.
While smartphone demand remains weak, SK Hynix expects growth in PCs and AI-enabled devices. This growth is expected to contribute to a stronger second half of the year. The company hopes that AI demand will offset the weakness in traditional memory markets.
Competition Intensifies in the HBM Market
SK Group Chairman Chey Tae-won recently met with Nvidia co-founder Jensen Huang. They discussed ways to strengthen their partnership. SK Hynix is working hard to deliver its next generation of HBM chips this year. The company is investing heavily in production capacity. This includes a $15 billion investment in South Korea and a $3.9 billion investment in an advanced packaging plant and AI research center in Indiana.
Despite the substantial profit increase, Nvidia Partner SK Hynix’s profit fails to impress AI chip bulls, who are weighing the impact of potential competition from rivals like Samsung. Samsung is also actively pursuing the HBM market. The company plans to mass-produce HBM4 chips in the second half of 2025. This aims to close the gap with SK Hynix. Samsung recently unveiled its new Galaxy S25 smartphone, highlighting its improved AI features.
Analysts predict a potential sequential decline in SK Hynix’s first-quarter sales. However, they expect strong year-over-year growth due to continued HBM demand. They also forecast a significant year-over-year increase in operating profit for the first quarter. This is due to the rising average selling price of DRAM chips, especially HBM. The demand for non-AI-related applications may be seasonally weak in the first quarter, impacting NAND sales.
