SK Hynix Inc. (NASDAQ:SKHY) delivered another blockbuster quarter, but Futurum CEO Daniel Newman believes the memory giant’s stock is still being valued as if the industry were headed for another traditional boom-and-bust cycle.
Why Newman Is Bullish On SKHY
During an interview with CNBC, Newman called SK Hynix shares “ridiculously cheap” after the company reported record quarterly revenue and operating profit on Tuesday after the closing bell.
Newman argued that the AI-driven memory shortage could persist for years as demand for high-bandwidth memory (HBM) continues to outstrip supply.
SK Hynix said during a post-earnings call with analysts that memory supply is unlikely to keep pace with demand and that the resulting supply constraint is expected to persist through 2030.
Futurum CEO Calls SKHY Stock ‘Ridiculously Cheap’
Newman argued that SK Hynix’s latest results provide another strong signal that AI infrastructure spending remains resilient despite growing concerns about an AI bubble.
“SK comes out and says demand is surging,” Newman said. “We will be unable to fulfill that demand really through the end of the decade.”
The Futurum CEO pointed to SK Hynix’s long-term customer agreements as another indication that the current memory cycle could be fundamentally different from previous cycles.
He said agreements that traditionally ran for three to five years are now being extended at customers’ request, with some customers potentially seeking contracts lasting a decade.
“It starts to make stocks like SK Hynix trading at three or four times forward earnings estimates look ridiculously cheap,” he said.
Newman said the company had essentially delivered what investors needed to see: evidence that AI demand remains strong and that customers are preparing for sustained memory requirements.
“SK Hynix really did what it needed to do, proved that the AI trade is still very strong, and sent very strong long-term demand signals to the market,” he said.
Newman continued that the bigger question, however, is why investors continue to value memory companies like traditional commodity businesses. He said markets remain anchored to historical memory cycles, leaving investors concerned that another supply glut could eventually emerge.
“There’s this little bit of doubt that remains within the investment community that we could end up once again with a supply glut,” he said.
But he argued that today’s AI infrastructure buildout is creating a fundamentally different demand environment, with hyperscalers, enterprises and governments all investing in AI infrastructure.
SK Hynix Says Memory Shortage Could Persist Through 2030
SK Hynix said demand growth across the memory industry is “significantly exceeding initial expectations” as AI systems become more capable and generate, transfer and store increasingly large amounts of data.
AI infrastructure investment is also broadening beyond a handful of hyperscalers, according to SK Hynix. Enterprises and governments are increasingly investing in AI infrastructure, including sovereign AI and on-premises systems.
The company expects global AI data center infrastructure spending to grow at an annual rate of about 40% through 2030. At the same time, SK Hynix warned that memory supply cannot expand quickly enough to meet demand.
The memory maker expects the resulting supply constraint to persist through 2030 because of the time and complexity involved in expanding leading-edge production capacity.
SK Hynix also said that it had signed long-term agreements with 14 key customers, including major global cloud service providers, with volumes secured under those agreements representing more than 50% of its total capacity for 2027 and 2028.
Even more strikingly, SK Hynix said its contracted volumes and customer demand currently under discussion mean its DRAM and HBM volume for the next three years through 2029 is “effectively sold out.”
The company said the volumes under discussion are based on concrete customer purchasing plans and are “highly likely to come through.”
Nevertheless, SK Hynix stated that it is taking steps to avoid repeating the overproduction mistakes of past memory cycles. CFO Kim Woo-hyun said building new fabs does not necessarily translate into an immediate surge in memory supply because increasingly complex manufacturing processes and high-value products such as HBM require more resources.
The company plans to build production infrastructure ahead of demand while adjusting equipment deployment and mass-production ramps based on actual customer requirements.
SK Hynix expects HBM4 to overtake HBM3E in both shipment volume and revenue contribution during the fourth quarter.
“Demand remains so strong that customers’ volume requirement is more than double that of what we can supply today,” the company added.
Price Action: SK Hynix’s American Depositary Receipts were up 7.8% to $156.7 during Wednesday’s pre-market session, according to Benzinga Pro data.
Benzinga Edge Rankings indicate SKHY’s ADRs have a downward price trend in the short, medium and long terms.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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