Can SK hynix Quell the 'AI Bubble' With Record Results?... Conference Call Highlights 'Investment Sustainability'

Record-Breaking Quarterly Earnings

Earnings Momentum Expected to Continue in Second Half

Annual Operating Profit Projected at 294 Trillion Won

Market Remains Cautious Amid Overheating Concerns and Rising Competition from China

SK hynix has reported its highest-ever quarterly performance, taking steps to address recent concerns about an overheated artificial intelligence (AI) market. As shortages continue for high-performance memory products, including high bandwidth memory (HBM), this year's annual operating profit is projected to approach 300 trillion won. However, the sustainability of AI investments by major big tech companies, which will determine the company’s performance in the medium and long term, remains a key variable attracting significant market attention.

Hyunjong Song, President of SK hynix, stated during the company’s second-quarter earnings call on July 29, 2026, “Major big tech customers are expanding infrastructure investment due to the increase in AI service usage and a shortage of computing capacity. They are also continuing to ramp up memory purchases, underpinned by revenue and profit growth generated from AI services. For HBM4, we began mass production and shipments in the second quarter, and we plan to significantly scale up production in the second half of the year.”

Construction site of SK hynix Semiconductor Cluster Phase 1 Fab in Cheoin-gu, Yongin, Gyeonggi Province. Photo by Kang Jin-hyung

The semiconductor industry broadly believes that SK hynix’s earnings momentum is likely to continue at least through the second half of the year. This is because supply of high-performance products used in AI data centers, such as HBM, server DRAM, and enterprise solid-state drives (eSSD), continues to lag behind demand growth. In addition, as memory makers increase HBM output, they have less capacity available for standard DRAM production, further supporting price increases for DRAM.

Global investment bank Morgan Stanley has forecasted that memory semiconductor prices in the third quarter of this year will rise by at least 25% compared to the previous quarter. It noted that as the expansion of AI server infrastructure continues while new production facilities take time to translate into increased supply, shortages could persist until 2028.

Mid- to long-term demand prospects also remain positive. As major big tech companies move to proactively secure memory supply for AI infrastructure through long-term agreements (LTAs), visibility for the memory market outlook has improved. In particular, domestic firms such as SK Group and Samsung Electronics have recently announced large-scale, five-year AI infrastructure partnership plans with global big tech companies in Silicon Valley, fueling expectations that demand for HBM and server memory will remain strong for some time.

Accordingly, SK hynix's results in the second half of the year are expected to be driven by a dual engine of increased HBM shipments and rising prices for standard memory products. As the share of high-value-added products such as HBM and eSSD increases, profitability is also expected to improve, outpacing sales growth. If rising price trends for standard DRAM and NAND continue, it could extend not only to HBM but to memory products across the board.

Securities firms have been raising their annual performance forecasts for SK hynix. If the current upward trend in pricing and shipment volumes continues, annual operating profit could get close to 300 trillion won. Last month, Hana Securities projected full-year operating profit of 294 trillion won, reflecting rising standard DRAM prices and a greater share of high-value-added products including HBM and eSSD. The firm also offered a forecast of 435 trillion won for operating profit for next year. KB Securities, meanwhile, raised its forecasts in May to 280 trillion won for this year and 454 trillion won for next year.

Despite High Earnings, Market Worries About ‘AI Investment Slowdown’ Persist

The headquarters of SK hynix in Icheon-si, Gyeonggi-do, on May 26. Photo by Yonhap News.

However, the market remains cautious. On July 28, just one day before the earnings announcement, semiconductor stocks—including Samsung Electronics and SK hynix—plummeted in the domestic stock market. Concerns have once again mounted that the share prices and investment volumes of AI-related companies have been rising too rapidly, beyond their underlying profitability. Recently, SK hynix’s U.S. American Depositary Receipt (ADR) traded on the New York Stock Exchange has been priced 16–51% higher than its domestic shares, cited as an example of AI investment overheating.

Competitive pressure from Chinese semiconductor companies is also impacting investor sentiment. China's largest memory company, Changxin Memory Technologies (CXMT), debuted at the top of the mainland stock market at the time of its listing; meanwhile, state-owned enterprises and startups are reportedly beginning small-scale mass production of deep ultraviolet (DUV) immersion lithography equipment, raising expectations that Chinese companies could grow more quickly than anticipated.

During the earnings call, there were numerous questions about the risk of excess supply caused by reduced AI infrastructure investment and expanded production capacity. An SK hynix spokesperson commented, “We are aware of concerns that AI infrastructure investment could be slowing, as seen in some big tech companies’ review of data center leasing or the emergence of more efficient AI models. However, we view this not as a reduction in AI investment, but as a process of ramping up utilization and monetization of the large-scale AI infrastructure that has already been established.” The company also argued that improved efficiency in AI models will make AI services more accessible, further increasing demand.

Regarding concerns about semiconductor oversupply, SK hynix stated, “As plans to expand company capacity are being executed flexibly, there is little chance that mid- to long-term investments will immediately lead to oversupply. Actual equipment investments and production operations will be carried out in stages, taking into consideration customer demand visibility and investment efficiency.”

On this day, Mirae Asset Securities cut its price target for SK hynix shares by 33%, from 4.2 million won to 2.8 million won. This was attributed to a potential weakening of sentiment for legacy products amid factors such as CXMT’s public listing and the localization of lithography equipment. Mirae Asset researcher Younggun Kim commented, “While the average selling price (ASP) for memory is expected to keep rising next year, the pace of the increase will likely moderate compared to this year. Now is the time to pay attention to the sustainability of these higher profit levels.”

This content was produced with the assistance of AI translation services.