SK Hynix shares dropped significantly despite reporting exponential Q2 earnings and revenue growth, as results fell short of analysts’ ambitious AI-driven expectations. The memory chip maker saw revenue jump 257% and operating profit soar 557% year-over-year, driven by record demand for AI components like HBM. Despite the stock plunge, experts highlight the company’s strong pricing power and continued momentum from AI infrastructure investments, as SK Hynix also expanded its partnership with Nvidia.
Despite reporting phenomenal second-quarter earnings, shares of South Korean memory chip giant SK Hynix experienced a significant nosedive on Wednesday. The company's exponential growth, fueled by robust demand for artificial intelligence (AI) components, still fell short of the supercharged expectations set by analysts for the AI industry's darling.
Investors reacted strongly to the earnings miss, with SK Hynix stock initially plummeting as much as 15% before paring losses to close 9.6% lower for the day. This reaction highlights the incredibly high bar set for companies benefiting from the AI boom.
For the second quarter, SK Hynix reported revenue of 79.32 trillion won ($54.55 billion) and operating profit of 60.54 trillion won. While impressive, these figures missed LSEG SmartEstimates of 84 trillion won in revenue and 64 trillion won in operating profit, respectively.
Year-over-year growth was staggering: revenue surged 257%, and operating profit skyrocketed nearly 557% compared to the same period last year. Quarter-over-quarter, revenue increased 51% and operating profit gained 61%, underscoring a powerful growth trajectory.
The company attributed this strong performance to sustained demand growth from expanding AI infrastructure investments. High-performance products for AI servers, such as High Bandwidth Memory (HBM), specifically led to price increases that set new records. SK Hynix also achieved a historic milestone, with its cumulative revenue for the first half of the year exceeding 100 trillion won, a clear indicator of robust AI-driven demand.
Looking ahead, SK Hynix projects its capital expenditures for this year to reach the high 40 trillion won range. The company plans to prioritize investments in growth, ensure a sound financial structure, and continues to review shareholder-return policies. Production will be maximized by leveraging existing manufacturing hubs in Icheon and Yongin, while NAND production and advanced packaging capabilities will be boosted in Cheongju.
Josh Gilbert, lead analyst for APAC at eToro, noted the company's gross margin of 83% as a strong indicator of persistent pricing power. “That doesn’t exist in a market where demand is drying up; it exists in one where customers are fighting over supply,” Gilbert commented, reinforcing the narrative of high demand outstripping supply.
Both DRAM and NAND flash memory prices saw a quarter-over-quarter increase, driven by the company's strategy to expand sales of high-value-added products, including HBM, DRAM for AI servers, and enterprise SSDs. The momentum for memory demand is expected to continue, fueled by ongoing revenue from AI services and substantial infrastructure investments from major tech corporations.
SK Hynix highlighted its HBM4 technology, which demonstrates a differentiated technological edge in power efficiency and cost competitiveness. The company began mass shipments of HBM4 in Q2 to ramp up production in the latter half of the year and completed sample shipments of HBM4E in H1. For NAND, SK Hynix is accelerating its transition to advanced process nodes, aiming for 321-layer products to account for about 50% of domestic production capacity by year-end.
As a crucial supplier of memory chips for hardware ranging from data centers to smartphones, SK Hynix counts U.S. technology giants like Nvidia among its key clients. This partnership recently expanded through a multiyear deal reportedly worth over $500 billion, further cementing SK Hynix's pivotal role in the global AI ecosystem.
