SK Hynix’s Record Earnings Falls Short of Expectations, And Shares Fall 10%

Opening a new tab, South Korean chipmaker SK Hynix (000660.KS) announced impressive quarterly profits on Wednesday but fell short of high investor expectations, raising market fears about big tech companies’ slowing AI expenditure.

The company is rushing to secure long-term supply agreements in order to protect itself against the industry’s erratic demand cycles.

The quarterly operational profit of Nvidia (NVDA.O), a new tab supplier, increased more than sixfold to a record high, but it claimed that price increases for its mainstay dynamic random-access memory (DRAM) chips were constrained by shipment delays for some sophisticated devices.

As concerns about the sustainability of big companies’ aggressive AI spending were reinforced by the weaker-than-expected earnings, shares of SK Hynix closed down 9.6% on Wednesday. The benchmark KOSPI (.KS11) opens a new tab with a 6% decline.There are worries that tech companies would stop investing in infrastructure, according to Lee Min-hee, an analyst at BNK Investment & Securities.

According to experts, the company’s embrace of long-term agreements that could limit upside in memory pricing and its inability to present specific plans for sharing the benefits of the AI boom through increased shareholder returns further damaged investor sentiment.

The stock is still up over 115% so far this year, but it has lost more than half of its value since reaching a new high last month.

SK Hynix stated that demand for AI memory chips was still high despite the market decline. During an earnings call, SK Hynix President Song Hyun-jong stated, “Major customers are still requesting more memory supply,” adding that the company was looking for more long-term supply agreements to better control the volatility of chip prices.

The action highlights how chipmakers are attempting to translate the current AI-driven boom into longer-term demand certainty in the face of worries that investment in AI infrastructure may eventually decline.

Long-term contracts, which are normally for five years, include financial protections such deposits to guarantee contract execution, according to SK Hynix. According to the corporation, it has completed negotiations on about ten of these agreements and is still in talks with other significant industry participants.