Why SK Hynix shares crashed despite 557% profit surge
What's the story
South Korean chipmaker SK Hynix reported surging quarterly earnings, though its results fell short of high investor expectations fueled by the AI boom. Operating profit for the April-June period jumped 557% to 60.54 trillion won ($42 billion), missing analyst forecasts of 64 trillion won. Revenue reached 79.32 trillion won ($54.55 billion), also coming in below the projected 84 trillion won.
Market reaction
Shares plummet on AI spending concerns
In light of the weaker-than-expected earnings, SK Hynix's shares crashed 15% earlier in the session. The stock trimmed its losses to close 9.6% lower in today's session.
The decline is largely due to heightened investor concerns over the sustainability of aggressive AI spending by tech firms.
"There are concerns that tech firms will take a breather in infrastructure spending," said Lee Min-hee, an analyst at BNK Investment & Securities.
Strategic shift
Memory chip demand remains strong, says SK Hynix
In response to the market's reaction, SK Hynix has acknowledged that memory chip demand remains strong.
The company's president Song Hyun-jong said major customers are still asking for more memory supply.
He added that they are looking for more long-term supply agreements to better manage chip price volatility.
This comes as part of a strategy by chipmakers to turn today's AI-driven boom into long-term demand certainty amid fears of a potential slowdown in AI infrastructure spending.
Future outlook
Long-term supply agreements concluded
SK Hynix has concluded talks on around 10 long-term supply agreements with financial safeguards such as deposits to ensure contract implementation.
The company remains optimistic about AI memory demand, saying major technology companies are increasing investments in AI infrastructure.
"With major tech companies increasing their AI infrastructure investments, additional supply requests continue to mount," the company said.
Financial strategy
Capital spending to increase
SK Hynix plans to raise capital spending this year to the high-40 trillion won range, up from 30.173 trillion won in 2025.
The company downplayed fears that its capacity expansion could lead to oversupply, saying it would adjust investments according to market demand.
At the end of June, SK Hynix's net cash stood at 88 trillion won. It hopes to increase that figure to over 100 trillion won in order to better respond to customer demand and stabilize business operations.