South Korean chipmaker SK Hynix has reported record quarterly operating profit driven by strong demand for artificial intelligence (AI) memory chips, although the results fell below high investor expectations, triggering a sharp decline in the company’s share price.
The Nvidia supplier’s operating profit for the April-June period surged more than sixfold to 60.5 trillion won ($41.62 billion), compared with 9.2 trillion won a year earlier. However, the figure was below the 64 trillion won forecast by analysts tracked by LSEG SmartEstimate.
Following the earnings announcement, shares in SK Hynix dropped 10 per cent as investors expressed concerns over whether the current pace of AI infrastructure spending by major technology companies can be sustained.
Analysts said market sentiment was affected by uncertainty over future investment by major AI infrastructure buyers, including Microsoft, Alphabet, Amazon, Meta Platforms and Oracle, which are committing hundreds of billions of dollars towards AI development.
“There are concerns that tech firms will take a breather in infrastructure spending,” Lee Min-hee, an analyst at BNK Investment & Securities, said.
Despite the market reaction, SK Hynix maintained that demand for memory chips remains strong, with major customers continuing to request increased supplies.
“Major customers are still requesting more memory supply,” SK Hynix President Song Hyun-jong said during an earnings call, adding that the company was pursuing more long-term supply agreements to reduce exposure to volatile chip price cycles.
The company has already concluded discussions on about 10 long-term supply agreements and is continuing negotiations with other major industry players. The agreements include financial safeguards such as deposits to support contract commitments.
SK Hynix said the strategy would help transform the current AI-driven boom into more predictable long-term demand, as concerns grow over the sustainability of technology companies’ spending on AI infrastructure.
The company said AI memory demand remains resilient, noting that major technology firms are continuing to expand their AI investments.
“With major tech companies increasing their AI infrastructure investments, additional supply requests continue to mount,” SK Hynix said. “As these investments are supported by revenue generated from AI services, the momentum in memory demand is expected to persist.”
However, analysts noted that long-term supply agreements could limit short-term price increases, contributing to the earnings shortfall. They also pointed to SK Hynix’s greater exposure to high-bandwidth memory (HBM) chips, where price increases have been less aggressive than traditional memory products.
SK Hynix, which supplies HBM chips used in Nvidia’s artificial intelligence systems, said it plans to increase capital expenditure this year to the high-40 trillion won range from 30.173 trillion won in 2025.
The company said the additional investment would support expanded production capacity while insisting that it would adjust spending according to market conditions to prevent oversupply.
The chipmaker’s revenue for the quarter rose 257 per cent to 79.3 trillion won, while net profit increased more than 13-fold to 93.9 trillion won. The increase was partly supported by 63.3 trillion won in gains linked to investment assets.
Analysts attributed part of the investment gains to the completion of SK Hynix’s sale of its stake in Japanese NAND flash memory producer Kioxia. The company invested about 4 trillion won in Kioxia in 2018 through a consortium led by Bain Capital.
SK Hynix also reported a net cash position of 88 trillion won at the end of June and said it aims to increase this to more than 100 trillion won to strengthen operations and respond to customer demand.
However, investors are seeking clarity on how the company intends to use its growing cash reserves, particularly regarding shareholder returns.
SK Hynix said it was not yet ready to announce details of its shareholder return policy, including its timing, size or structure, but would provide further information later this year.
“SK needs to come up with a concrete shareholder return policy to turn around investor sentiment,” Greg Roh, head of research at Hyundai Motor Securities, said.
The company’s latest performance highlights the opportunities and challenges facing chipmakers as the global AI boom continues to fuel demand for advanced memory technology while raising concerns about future spending levels and market stability.
