SK hynix Inc. (NASDAQ:SKHY) now turns 80% of its sales into operating profit. Yet even after Wednesday’s rally, its Seoul-listed shares are worth about half what they were in June.
The memory maker posted record third-quarter results on Wednesday, and the stock jumped 10.9% to 1,487,000 won, its biggest one-day gain since July 31.
Still, that leaves the shares 49% below their record close of 2,919,000 won on June 22. Between Sept. 1 and Tuesday, they had lost 21% as investors questioned how long Big Tech’s artificial-intelligence spending could last.
MS Hwang, research director at Counterpoint Research, told Benzinga the memory boom has further to run.
“Pricing power is highly likely to remain in the hands of suppliers for the next several years,” Hwang said.
Yet, he expects Samsung Electronics Co. Ltd. (OTC:SSNLF) to lead in the most valuable part of the market by 2027.
SK hynix daily chart and daily rate of change. Source: TradingView
According to Hwang, Samsung spent too long on the chip-scaling race and was slow to build products for AI customers. Still, he expects the Suwon, South Korea-based tech company to overtake SK hynix starting with HBM4 and lead in market share by 2027.
“The new management team’s choice was a ‘back to basics’, sacrificing immediate market share to ensure the quality of products delivered to clients,” Hwang said. “Although this transition took time, it has proven successful.”
Micron Technology Inc. (NASDAQ:MU), a late entrant in HBM, is steadily moving toward an HBM share that matches its overall position in memory, he added.
A Quarter That Topped 100 Trillion Won
SK hynix’s operating profit reached 83.3 trillion won, or about $62.2 billion. That’s up from 11.4 trillion won a year earlier. Analysts had expected about 77 trillion won, Hwang noted.
Revenue rose 328% to 104.6 trillion won ($78 billion), above 100 trillion won for the first time.
The company also plans about 100 trillion won ($74.6 billion) in shareholder returns this year, including a 20,000-won third-quarter dividend.
Hwang welcomed the decision to drop a planned IPO of Solidigm, its NAND storage unit.
“If the returns do not flow back to shareholders, it is hard to re-rate the stock,” he said in emailed comments.
Nvidia’s Rubin Ramp Clears a Key Hurdle
For months, the main worry was whether SK hynix could qualify HBM4, its newest high-bandwidth memory, for Nvidia Corp.‘s (NASDAQ:NVDA) next-generation Rubin platform.
“While challenges were anticipated through September, supply is now fortunately expected to proceed without a hitch,” Hwang told Benzinga.
According to Hwang, both sides gave ground. Nvidia lowered its maximum pin speed from 11.7 to 10.6 gigabits per second, while SK hynix improved its manufacturing yields.
Prices Could Fall 30% and Margins Would Still Be Huge
Hwang argued that memory earnings are now driven by pricing rather than volume. Prices that sat around 20 to 30 cents per gigabit have climbed to about $2, he said, and HBM4 should reach $4.
That lifted the DRAM market above $200 billion in a single quarter for the first time, according to Hwang.
“Even if prices drop by 30% in 2028, suppliers’ profit margins would arithmetically only ease from 80% to 70% level,” he said.
Q3 Figures Back That Up
A 30% revenue cut with flat costs would still leave about 51.9 trillion won ($38.8 billion) in operating profit, a 71% margin.
SK hynix has also signed long-term agreements covering more than half of its 2027 and 2028 capacity.
Cantor Fitzgerald’s C.J. Muse, who rates the stock Overweight with a $250 target, said the shares trade at about three times his 2027 earnings estimate.
“Our view is this current AI cycle is elongated and durable, supported by TSMC/HBM/Substrate constraints,” Muse said.
One detail in his note stands out. Cantor estimates that conventional DRAM reached gross margins of about 90% in the September quarter, above the roughly 78% earned on HBM.
Net profit, however, fell 58% from the second quarter on currency and investment losses, Muse noted.
Why a 2018-Style Order Freeze Looks Unlikely
In the worst case, Hwang says, a 2018-style pullback could see cloud providers cut orders at once.
“To enable full-fledged AI services, memory has essentially become a utility cost,” Hwang said. Barring a macro shock, a synchronized halt in orders is “highly unlikely,” he added.
For U.S. investors, the Roundhill Memory ETF (BATS:DRAM), which holds Micron, Samsung and SK hynix, is up 73% since its April debut.
SK hynix has shown that the profits are real. What the market has yet to price is how long they last and how much Samsung wins back.
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