Key Takeaways
- SK Hynix shares have surged over 90% in the past year.
- Analysts predict further gains, with price targets up to 350,000 won.
- Upcoming earnings report expected to show a significant profit jump.
What Happened?
Shares in SK Hynix Inc., Nvidia’s key supplier, soared over 90% in the past year. Wall Street analysts are optimistic, with 19 raising their forecasts in the last month alone. Goldman Sachs set a stock-price target of 290,000 won ($210), implying a 25% potential gain, while Citigroup’s bullish target of 350,000 won predicts more than a 50% increase from current levels.
SK Hynix, the leading supplier of high-bandwidth memory (HBM) chips, is projected to report a second-quarter operating profit of 5 trillion won, the highest in six years, reflecting a robust recovery in memory-chip prices driven by AI demand.
Why It Matters?
The significance of this surge lies in the underappreciated potential of HBM chips. Roh Jongwon, CIO at Infinity Global Asset Management, notes, “The current share valuation isn’t fully reflecting the potential of high-bandwidth memory chips.” HBM chips are nearly twice as profitable as traditional memory chips, suggesting SK Hynix’s valuation could still be undervalued.
As AI technology continues to expand, the demand for high-end memory chips is expected to rise, positioning SK Hynix for sustained growth. The stock’s current valuation at 2.9 times book value, the highest since 2011, indicates strong investor confidence despite potential risks.
What’s Next?
Investors should watch for SK Hynix’s earnings announcement on July 26, expected to confirm a significant profit increase. While the market is optimistic, some caution is warranted due to potential volatility. DS Asset Management’s Yoon Joonwon points out, “We have entered uncharted territory in terms of valuation.”
Moreover, SK Hynix’s $75 billion investment plan through 2028 raises concerns about possible oversupply, which could depress chip prices. However, the AI market’s potential remains largely untapped, with Citigroup’s Peter Lee comparing it to the early days of smartphones. As the AI industry grows, SK Hynix’s strategic position as a leading HBM supplier could drive further gains.
