South Korea's SK Hynix has reported its highest quarterly profit since 2018, attributing the surge to the increasing demand for artificial intelligence chips.
What Happened: SK Hynix, a major supplier to NVIDIA Corp. (NASDAQ:NVDA), announced a second-quarter operating profit of 5.47 trillion won ($3.96 billion), marking its third consecutive profitable quarter after incurring losses last year, Reuters reported. This profit is the highest since the third quarter of 2018.
The company's revenue also soared by 125% year-over-year to a record quarterly high of 16.4 trillion won, driven by the surging demand for high-end DRAM chips, including High Bandwidth Memory chips used in data center servers and on-device AI services.
SK Hynix, the second-largest memory chipmaker globally, has been a significant beneficiary of the AI-driven appetite for high-end chips and enterprise solid-state drives (eSSDs). The company's early entry and substantial investments in these segments have contributed to its impressive performance.
"The company will further solidify the position as a leader in AI memory products ... based on a stable financial structure," said Chief Financial Officer Kim Woohyun.
However, SK Hynix's stock dropped by 7.8% on Thursday in Seoul, marking the largest intraday decline since November 2022. This followed a broad sell-off in US tech stocks, including a 6.8% decrease for Nvidia.
Why It Matters: This surge in profit follows a series of events that have positioned SK Hynix for success. In April, the company announced plans to invest $3.87 billion in its first-ever chip packaging facility in the United States. The facility, expected to commence operations in 2028, will focus on producing high-bandwidth memory chips, crucial components in AI systems such as Nvidia GPUs.
SK Hynix's parent company, SK Group, also pledged to invest $56 billion in AI and semiconductor technology by 2026. This investment, primarily directed towards HBM chips, data centers, and personalized AI assistant services, is designed to bolster its supply chains for emerging technology.
Analysts have also been optimistic about SK Hynix's future, with many revising their forecasts upwards, driven by the high potential for AI and the anticipation of a positive surprise in the company's earnings. This sentiment was reflected in the company's stock performance, which has soared over 90% in the past year, with further growth predicted by Wall Street analysts.