SK hynix Inc. (NASDAQ:SKHY) remains at the center of the AI memory trade as investors weigh record profitability, tight supply and long-term demand against valuation, competition and the possibility of a more normalized memory cycle.
Record Profit and Strong Demand Outlook
On Tuesday, SK hynix reported a record operating profit of 83.33 trillion won ($62.55 billion), up 632% year over year and exceeding analysts’ estimates of 76.7 trillion won. Revenue surged 328% to 104.62 trillion won ($78.52 billion), while its operating margin widened to 80%.
The company said higher memory prices and AI server demand drove the quarter. It has signed long-term agreements with 14 major customers, including global cloud providers, covering more than 50% of total production capacity for 2027 and 2028.
SK hynix expects demand to continue exceeding supply through 2030. For the fourth quarter, it guided to mid-20% DRAM growth from the prior quarter and mid-single-digit NAND growth. For 2027, it expects DRAM demand to rise in the mid-20% range and NAND demand in the high teens.
The company also plans to increase capital spending significantly from 2026 levels and return about KRW 100 trillion ($75 billion) to shareholders this year through dividends and buybacks.
Futurum Says SK Hynix Looks Cheap
Futurum CEO Daniel Newman said the results reinforced his view that the AI memory cycle could last much longer than previous cycles.
Newman told CNBC on Wednesday that SK hynix signaled that demand may remain stronger than supply through the end of the decade, while some customers are seeking to extend long-term agreements from three-to-five-year terms toward as long as a decade.
He argued that those demand signals make SK hynix look “ridiculously cheap” at roughly three to four times forward earnings.
Newman also said memory suppliers currently hold more pricing power than they historically did because AI demand is constraining DRAM and HBM supply.
He sees Chinese DRAM capacity as a potential source of additional supply, but said Chinese producers remain years away from offering competitive HBM products for advanced AI inference.
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Susquehanna Stays Neutral
Susquehanna analyst Mehdi Hosseini maintained a Neutral rating despite the stronger-than-expected quarter.
Hosseini told CNBC on Wednesday that gross and operating margins came in slightly above his forecasts and expects memory to remain in a favorable position as AI workloads shift from training toward inference.
He believes memory and networking will add increasing value to AI systems and does not expect a significant margin decline over the next few years, although some normalization remains possible.
However, Hosseini prefers Micron Technology Inc. (NASDAQ:MU) and Samsung Electronics Co. (OTC:SSNLF) on a relative basis because of their broader product portfolios.
He also agreed that SK hynix appears undervalued and highlighted its 45% free-cash-flow margin, while preferring its U.S. ADRs over the Korean-listed shares because of the larger U.S. investor pool.
SKHY Price Action: SK hynix shares were up 8.13% at $157.18 during premarket trading on Wednesday, according to Benzinga Pro data.
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