SURGING EARNINGS
SK Hynix has made its fortune by becoming the most sought-after supplier of high-bandwidth memory chips, a culmination of 14 years of bets that brought it skepticism and scorn but ultimately put it at the centre of the global AI gold rush.
“As long as there is demand for graphic processors and AI data centers, SK Hynix is indispensable,” said Yoo Hoi-jun, an electrical engineering professor at the Korea Advanced Institute of Science & Technology.
Nvidia CEO Jensen Huang said last month SK Hynix would continue to be the US AI chipmaker’s largest partner, adding that the current memory chip shortage would persist for a few years due to strong demand.
Though shares in semiconductor companies globally have lost momentum in recent weeks, companies like SK Hynix and rival Samsung Electronics are sitting on historic gains as insatiable demand for computer chips to power AI data centres has sent profits soaring.
“AI demand keeps inflecting, currently driven mostly by strong datacenter CPU demand. HBM demand also remains strong: we expect the market to grow from about US$65 billion this year to US$120 billion next year and about US$290 billion by 2030,” said Rolf Bulk, Head of Semiconductors and Infrastructure, Futurum Equities.
SK Hynix shares closed up 5 per cent on Thursday but have dropped by a quarter in the last two weeks.
Even so, the stock is up 680 per cent for the past 12 months.
As dizzying as that long-term share jump has been, the shares have not outpaced massive gains in profits – earnings so huge that each employee is expected to get an annual bonus of about US$574,500, making them highly sought-after marriage partners.
Tellingly, the firm’s 12-month forward price-to-earnings ratio has dropped, with its current level of 5.5 times down from 7.9 times at end-October.
“SK Hynix holds the edge in production scale and maturity. Across the board, since demand is far outweighing supply, they have had tremendous pricing power,” said Ken Mahoney, CEO of Mahoney Asset Management.
“So, generally speaking, their first mover advantage is and was their strength.”
