SK Hynix profit disappoints as spending soars to US$31 billion

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Or sign-in if you have an account.The logo of SK hynix is seen on the company's factory building in Icheon on July 29, 2026. Photo by Jung Yeon-je / AFP via Getty ImagesSK Hynix Inc. earmarked at least US$31 billion in capital spending this year after reporting a six-fold surge in quarterly profit, a record outlay that coincides with growing fears about overinvestment in AI capacity.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountSK Hynix said it expects its capital investments to rise around 50 per cent to at least 45 trillion won (US$31 billion). It posted margins of more than 80 per cent for the June quarter — a high watermark — because of the endemic memory shortages that have helped raise prices it charges customers like Apple Inc. and Nintendo Co.Yet the Korean company’s shares fell 19 per cent in Seoul Wednesday, reflecting both the sky-high expectations that surround the AI industry’s linchpins and the growing concerns that big tech firms such as Meta Platforms Inc. are building more data centers than they need. Korea’s benchmark KOSPI fell for a second straight day.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try againSK Hynix executives brushed aside those fears on Wednesday, telling investors they’re signing long-term contracts with no end in sight to explosive demand. They echoed SK Group Chairman Chey Tae-won’s view that demand will outpace supply till at least 2030. It’s now preparing to deliver the next-generation of high-bandwidth memory, known as HBM4E — in bulk to top customer Nvidia Corp. in 2027. And bit growth, or unit shipments of memory capacity, should accelerate in the second half, executives said.“Investor expectations might have gotten a bit excessive,” said Jason Lemire, chief investment officer at Bold Wealth Partners. “The results need to be put into perspective, though. These are amazing numbers. The company is firing on all cylinders, and faces so much demand pressure that it decided to radically increase its capex numbers.”Despite consistently strong numbers, SK Hynix’s shares have headed south since June after doubts grew about whether global AI spending will justify the chip sector’s lofty valuations. Tech companies’ rising debt levels are also weighing on investors’ minds. The growing amounts of leverage tied to players like SK Hynix in particular has also turbo-charged volatility across Korea’s bourse, wiping out roughly 45 per cent of the company’s value in about a month.Investors worry that soaring chip costs may trigger a broader economic slowdown, pushing prices of electronics higher and spurring manufacturers to cut production of devices like PCs and smartphones. Brokerages including Mirae Asset Securities Co. have trimmed their second-quarter profit estimates for SK Hynix in recent weeks, citing moderated growth in average selling prices of chips.Chipmakers have pushed back, saying that demand is expected to outstrip supply for the long term. They point to customers such as cloud service providers ratcheting up orders for memory, lifting both volumes and margins. SK Hynix chief executive Kwak Noh-Jung told Bloomberg earlier this month that the severe memory chip shortages that are roiling the computer, car and device makers would likely persist beyond 2030.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.SK Hynix’s net income surged a bigger-than-expected 1,242 per cent on one-time investment gains in the June quarter, shoring up the company’s financial strength. Operating profit rose 557 per cent, but still fell short of elevated projections. Revenue also came below the average analyst estimate.“Demand is strong, and the AI memory story hasn’t broken, but expectations had simply moved ahead of what even another record quarter could deliver,” said Josh Gilbert, Etoro’s lead analyst for APAC and the Middle East. “Its second quarter is a lesson in just how high the bar now sits for anything tied to AI.”SK Hynix, along with Samsung Electronics Co. and Micron Technology Inc., dominates global memory supply. The trio has increasingly shifted production in recent years toward high-bandwidth memory used in Nvidia’s AI accelerators, tightening supplies of conventional memory.Attention now is on SK Hynix’s pricing ability. SK Hynix won multiyear contracts with around 10 customers, it said. And last week, parent SK Group signed a pact with Nvidia on a partnership spanning deals worth more than US$500 billion. The figure includes money that Nvidia will spend buying memory chips, as well as purchases of supercomputers, Nvidia CEO Jensen Huang told Bloomberg Television.The less-than-expected operating profit was mainly because of a somewhat weaker product mix, said Sanjeev Rana, head of research at CLSA Securities Korea. “2027 is still going to be a year we will see memory supply being very tight. After such a big correction recently it’s a good buying opportunity.”With assistance from Youkyung Lee, Sangmi Cha, Cat Barton and Sohee KimNotice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.