South Korean chipmaker SK hynix reports 1,242% profit surge on booming AI demand
SK hynix's Q2 net profit soared 1,242% year-on-year, but shares fell as revenue and operating profit missed expectations.
South Korea's SK hynix said on Wednesday that its second-quarter net profit surged 1,242% year-on-year, driven by the artificial intelligence industry's surging demand for its advanced memory chips. Despite the record result, its shares closed 9.6% lower in Seoul after revenue and operating profit missed market expectations.
The company is a key supplier of high-bandwidth memory chips to US tech giant Nvidia and a pillar of South Korea's tech-led economy. The global race to build data centres housing AI infrastructure has helped the firm grow significantly, despite concerns that the sector may be overvalued and in a market bubble.
Quarterly net profit reached 93.9 trillion won (€56.9 billion), which the Icheon-based firm described as "an all-time high quarterly performance". "We are aware of concerns that AI infrastructure investment might be slowing down," Park Joon-deok, marketing chief of the AI microchip division, said on a call with investors and reporters. He cited jitters over firms renting data-centre capacity rather than building their own facilities, as well as the emergence of new, more efficient AI models that require lower memory workloads.
Operating profit between April and June jumped 557% from a year earlier to 60.5 trillion won (€36.6 billion). Revenue stood at 79.3 trillion won (€48 billion), with net profit boosted by a one-off gain from the sale of part of SK hynix's stake in Japanese flash-memory maker Kioxia, another beneficiary of the AI boom.
SK hynix said it intends to make investments in the 40 trillion won (€24.2 billion) range this year, with growth attributed to expanding investments in AI infrastructure as the technology evolves into more complex forms. The company stated that with major tech companies increasing their AI infrastructure investments, additional supply requests continue to mount, and momentum in memory demand is expected to persist.
Parent conglomerate SK Group announced on Saturday plans for a new $500 billion (€438.6 billion) collaboration with Nvidia to invest in AI infrastructure. Earlier this month, SK hynix also raised $26.5 billion (€22.8 billion) through a US offering of American depositary receipts, one of the world's largest-ever equity offerings.
Despite aggressive investments, shares in SK hynix and its larger South Korean rival Samsung Electronics had fallen sharply by 33% and 41% respectively over the month to Tuesday. KB Securities analyst Kim Dong-won noted in a Monday note that the earlier decline was attributed to concerns about the sustainability of the AI industry and conflict in the Middle East spooking investors. Nonetheless, Kim forecast that memory chip prices were likely to rise "at least 30% in the third quarter", with supply shortages likely to persist until 2028.
Samsung Electronics is due to report its quarterly earnings on Thursday. The company has forecast that its second-quarter operating profit will rise about 1,800% from a year earlier.
