Why SK Hynix shares slipped despite 2000% surge in operating profit

SK Hynix, one of the world’s leading memory chipmakers, announced record-breaking fourth-quarter earnings on Thursday, fuelled by surging demand for high-bandwidth memory (HBM) chips used in artificial intelligence (AI) servers.

The company reported revenue of 19.77 trillion won ($13.7 billion), up 75% year-on-year, and operating profit of 8.08 trillion won, marking a staggering 2,236% increase compared to the same period last year.

SK Hynix attributed the strong results to robust AI server investments and its cutting-edge HBM technology.

“With prolonged strong demand for AI memory, the company achieved all-time high results through world-leading HBM technology and profitability-oriented operations,” SK Hynix said in its earnings release.

Why SK Hynix shares fell on Thursday

While AI memory remains a bright spot, SK Hynix acknowledged demand uncertainties for 2025.

The company’s stock fell 2.7% on Thursday as CFO Kim Woohyun warned that the outlook for memory demand in 2025 was clouded by inventory adjustments from PC and smartphone manufacturers as well as strengthened protective trade policies and geopolitical risks.

DRAM demand is projected to grow by a mid-to-high teen percentage in 2025, while NAND demand is expected to rise by a low teen percentage.

NAND chips, which often work alongside DRAM in devices, are another crucial revenue stream for the company.

During the earnings call, SK Hynix management said that the company could see a “slight increase” in capital expenditure in 2025 compared with the prior year.

Speaking to CNBC’s “Street Signs Asia” Thursday, SK Kim, analyst at Daiwa Capital Markets, said SK Hynix’s fourth-quarter earnings were “quite robust,” but noted that investors may be concerned about the market entering an adjustment period. 

He added that SK Hynix will maintain a leadership position in HBM.  

What drove SK Hynix’s earnings growth

HBM chips, which stack DRAM vertically to improve speed and efficiency, were a key driver of SK Hynix’s record performance.

These chips made up 40% of the company’s DRAM revenue in Q4. SK Hynix is a primary supplier to Nvidia, the US AI chip giant, and plans to launch its next-generation HBM4 chips in the second half of 2025.

“SK Hynix will be a big beneficiary” of Stargate,” said Sanjeev Rana, an analyst at CLSA Securities Korea.

“They have a significant lead, whether in terms of product quality of production yields…It will take some time for competitors to catch up.”

The fourth-quarter earnings capped a stellar year for SK Hynix, which achieved record annual revenue, surpassing its previous high of 2022 by over 21 trillion won.

Meanwhile, operating profit beat a record set in 2018 during a “super boom” in the semiconductor industry.

Staying ahead in the AI race

SK Hynix has committed to staying at the forefront of the AI revolution, increasing investments in advanced packaging and research.

The company plans to spend $3.9 billion on an advanced packaging facility and research centre for AI products in Indiana, alongside a $15 billion investment in its South Korean facilities.

As competitors like Samsung and Micron ramp up efforts to challenge SK Hynix’s dominance in HBM, the Korean firm remains focused on innovation.

SK Group Chairman Chey Tae-won recently met Nvidia co-founder Jensen Huang to discuss deeper collaboration.

Chey Tae-won told reporters at CES in Las Vegas that SK Hynix has quickened its pace of development to keep up with Nvidia’s demands.

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