SK Hynix Stock Falls 9% as Quarterly Profit Misses Expectations

SK Hynix shares came under heavy pressure after the South Korean memory-chip manufacturer reported quarterly revenue and operating profit below analysts’ expectations, despite delivering substantial year-on-year growth.

SK Hynix Inc. ADRs closed Tuesday at $130.17, falling 8.98%, or $12.85, during regular trading. The stock recovered slightly after the closing bell, rising 1.70% to approximately $132.39. 

SK Hynix share price (Source: Google Finance)

The sharp decline reflected the growing concerns that the artificial intelligence investment boom, which helped propel SK Hynix and other semiconductor stocks to record valuations, may be losing momentum.

SK Hynix Profit Misses Elevated Expectations

SK Hynix reported operating profit of 60.5 trillion won, or approximately $42 billion, for the June quarter. Although this represented an increase of 557% from the previous year, it fell short of analysts’ average forecast of 64.2 trillion won.

Quarterly revenue reached 79.3 trillion won, compared with the consensus estimate of 83.9 trillion won. Net income increased by a considerably stronger 1,242%, exceeding expectations with help from one-time investment gains.

Nevertheless, the weaker-than-expected operating results added to concerns that chip-price growth may be moderating. Several brokerages, including Mirae Asset Securities, recently reduced their quarterly profit estimates for SK Hynix due to slower growth in average selling prices.

AI Spending Concerns Weigh on SK Hynix Stock

SK Hynix has been a major beneficiary of the AI infrastructure boom, overtaking Samsung Electronics. However, the company has reportedly lost more than $500 billion in market value since June. Its valuation has fallen by approximately 45% in about a month as investors question whether technology companies will generate adequate returns from their enormous AI infrastructure investments.

Rising debt levels in the technology and semiconductor sectors only added to the uncertainty. Investors are also concerned that increasing chip prices could raise the cost of computers, smartphones and other electronic products, which could potentially weaken consumer demand and force manufacturers to reduce production.

Chipmakers hold firm that the long-term outlook remains positive. SK Hynix CEO Kwak Noh-Jung recently said severe memory shortages could persist beyond 2030 as cloud-service providers increase their orders and AI workloads require more advanced memory.

SK Group also signed a wide-ranging partnership with Nvidia that the companies said could involve more than $500 billion in business. The figure includes Nvidia’s purchases of memory chips and SK Group’s acquisition of Nvidia-powered supercomputers.

Press release from SK Hynix

Despite these long-term demand expectations, the latest earnings miss shows that SK Hynix faces demanding investor expectations.