SK hynix posts 632% operating profit jump, but misses forecasts

SK hynix reported a 632 percent on-year jump in third-quarter operating profit on Wednesday, reaching 83.33 trillion won ($62.8 billion) for the July-September period. The number lands as the clearest read yet on how hard the AI build-out is pulling on advanced memory supply — and it still wasn't enough for the market.

Net profit climbed 215.7 percent from a year earlier to 39.77 trillion won, on sales of 104.61 trillion won. That misses the street: analysts polled by Yonhap's data arm had averaged 59.67 trillion won in expected net profit. Shares have been under pressure since June, with record quarterly results largely priced in already.

The company has now posted record revenue and operating profit for six consecutive quarters, a streak stretching back to the second quarter of 2024.

What's actually driving the numbers?

SK hynix is the specialist supplier of high-bandwidth memory (HBM) chips to Nvidia, and a pillar of South Korea's tech-led economy. The global race to build AI data centres has rebuilt its fortunes, even as some investors warn the sector is overvalued.

Two product lines carry the weight:

• DRAM and HBM: soaring DRAM prices amid a global shortage, plus stronger sales of high-margin HBM, did the heavy lifting on earnings.
• NAND: the AI boom lifted both prices and shipments of conventional NAND storage chips, which everyday gadgets use but which also feed generative AI's enormous data-processing needs.

In a statement, the chipmaker framed demand as self-reinforcing: "SK hynix analyzed that a virtuous cycle has taken hold in which AI-driven productivity gains and new revenue generation in areas such as software development, customer service, and search lead to greater AI adoption."

Has the cycle peaked?

Not according to the analysts watching it. Long-term agreements signed with major customers, Nvidia among them, point to further price increases across conventional DRAM, NAND and HBM, MS Hwang of Counterpoint told AFP.

"This indicates that quarterly earnings have not yet reached their peak and that the upward trajectory will likely sustain at least through 2027," Hwang said.

The risks sit further out. Looking to 2027, "weaker AI spending, increased competition, and the company's own capacity expansion are all factors that dictate price volatility," Hwang said.

And one scenario worries him more than the rest: "The single most severe threat would be a scenario reminiscent of 2018, where cloud service providers simultaneously pull back on their order volumes." Anyone who traded memory in 2018 knows what that looks like — a synchronized order freeze that turns a shortage into a glut within quarters.

What it means for practitioners

For buyers, the message in the long-term Nvidia agreements is blunt: budget for higher memory pricing through at least 2027, on top of what the shortage has already pushed through. For anyone tracking the supply side, watch SK hynix's own capacity expansion — the same capex that chases today's demand is the mechanism that eventually breaks pricing, as Hwang's 2027 caveats make clear.