The best quarter in its history was not enough, and the stock fell by 15%

The company reported revenues of 79.3 trillion won (approximately $54.6 billion), a 257% increase compared to the same period last year. Operating profit amounted to 60.5 trillion won (about 41.6 billion dollars), a jump of 557% from year to year. The net profit jumped by 1,242% and reached 94 trillion won (about 64 billion dollars), among other things following the sale of its holding in the flash chip company Kioxia. This is the best quarter in the company’s history, and for the first time the revenues of the first half also crossed the 100 trillion capital mark (about 69 billion dollars).

But the results were lower than the market forecasts. Analysts expected revenues of about 84 trillion won (about $57.8 billion) and operating profit of about 64 trillion won (about $44.1 billion). In a market where SK Hynix has become one of the biggest beneficiaries of the AI ​​revolution, even hundreds of percent growth is not enough when expectations are even higher.

Now, the declines in the stock are particularly noticeable because they come less than three weeks after the company completed its ADR (American Depositary Receipts) offering on Nasdaq – that is, depository receipts that allow American investors to trade shares of a foreign company as if they were American shares. As part of the offering, the company raised $26.5 billion, in one of the largest share offerings ever made by a foreign company in the United States.

The concern: will the AI ​​boom lead to an oversupply?

SK Hynix is ​​one of the main suppliers of Nvidia In the field of HBM (High Bandwidth Memory) chips, which are used to train and run artificial intelligence models. According to the company, the huge investments of the technology giants in data centers and AI infrastructures continue to increase the demand for memory chips, and it estimates that the trend will continue in the second half of the year. The company explains that the artificial intelligence services are already beginning to generate revenue for the major cloud providers, which allows them to continue and expand investments in computing infrastructure.

To meet demand, the company continues to expand its product offering. During the last quarter, the company began mass production of HBM4 chips, and in the first half of the year also completed sample shipments of the HBM4E version to customers. At the same time, it is speeding up the transition to 321-layer production technology in the NAND chips for data storage, which by the end of the year is expected to make up about half of its production capacity in the field. The company also announced that this year it will invest about 40-50 trillion won (about 28-34 billion dollars) in expanding production, developing the next generation of memory chips and increasing advanced packaging capabilities.

Despite the company’s optimism, investors fear that the huge wave of investment by the chip makers could lead to an oversupply within a few years – a scenario well known to the memory industry, which is characterized by a sharp cycle of shortages, overproduction and price drops. Also the strengthening of Chinese chip manufacturers and the continued aggressive investments of companies such as Samsung andMicron Technology adding to concerns about increasing competition in the coming years.

SK Hynix rejects these estimates. The company claims that the demand for advanced memory chips continues to rise, while the prices of DRAM and NAND chips continued to climb in the last quarter as well. According to her, long-term supply contracts with key customers provide greater stability compared to the business cycles that characterized the industry in the past, and the shortage of memory chips for artificial intelligence is expected to continue for years to come.