Key Takeaways
- SK Hynix's shares jumped nearly 13% in Seoul, tracking gains in U.S. tech stocks.
- Analysts remain optimistic about structural demand from AI applications supporting the market.
- HSBC and Barclays have issued positive ratings for SK Hynix, citing improved profitability and long-term supply agreements.
Shares of South Korean semiconductor giant SK Hynix surged by nearly 13% in Seoul on Wednesday, mirroring a broader rally in U.S. tech stocks following softer-than-expected inflation data. The gains came as investors expressed optimism about the potential for artificial intelligence (AI) applications to drive demand for memory chips.
The upward momentum extended beyond SK Hynix, with Samsung Electronics and chip equipment maker Hanmi Semiconductor also seeing significant increases. Samsung's shares rose nearly 8%, while Hanmi Semiconductor gained around 25% in early trade, reflecting the broader market sentiment.
According to Kim Sunwoo, a senior analyst at Meritz Securities, suppliers of DRAM chips are currently meeting only about 75% to 80% of demand. He predicts that this fulfillment rate could fall to as low as 60% by 2027, indicating potential further shortages and price increases in the future.
Analysts from HSBC echoed Kim's optimistic outlook, stating that improving profitability of AI services should continue to underpin strong cloud spending. The brokerage also initiated research coverage on SK Hynix’s American Depositary Receipts (ADRs) with an 'overweight' rating and a $330 price target, reflecting their confidence in the company's future earnings potential.
Barclays added to the positive sentiment by initiating research coverage on SK Hynix’s ADRs with an ‘overweight’ rating and a $330 price target. The ADRs surged nearly 28% to $193.92 on Nasdaq, underscoring investor enthusiasm for the company's prospects.
Despite concerns over potential slowdowns in memory earnings growth due to moderating quarterly price increases, some analysts remain bullish. Goldman Sachs noted that the selloff in South Korean chip stocks had been amplified by the unwinding of positions in newly launched exchange-traded funds (ETFs) heavily skewed towards one or two stocks, while the underlying semiconductor cycle remained fundamentally robust.
SK Hynix's Chief Executive Kwak Noh-jung has warned that the global memory industry is set to face its worst-ever supply shortage in 2027. He expects demand to continue exceeding the company’s production capacity well beyond 2030, despite aggressive expansion plans.
With supply shortages set to deepen, memory prices and earnings are likely to continue improving, supporting a strong rebound in the share price.
Kim Sunwoo, Senior analyst at Meritz Securities
Improving profitability of AI services should continue to underpin strong cloud spending.
HSBC, Brokerage firm
