Volkswacht Bodensee - Chip giant SK hynix posts record quarterly profit on AI boom

Huge investments from governments and major technology companies are driving frenzied demand for the hardware that powers generative AI tools.

The South Korean firm posted net profit of 40.3 trillion won ($27.2 billion) in the first quarter, up nearly 400 percent year-on-year.

The figure smashed estimates of 29.4 trillion won in a Bloomberg analyst survey.

Revenue surpassed 50 trillion won for the first time in a single quarter, while operating profit nearly doubled compared to the previous three-month period.

"Despite the fact that first quarter is typically a seasonal downturn, strong demand persisted due to expanded investments in AI infrastructure," SK hynix said.

"As AI evolves from large model training to the stage of agentic AI, which repeatedly performs real-time inference across various service environments, the foundation for memory demand is expanding."

The AI boom has pushed up prices and shipments of conventional memory semiconductors, while demand for high-bandwidth memory (HBM) chips, used in AI servers, has soared.

That has caused SK hynix shares to skyrocket by around 600 percent over the past year -- helping push Seoul's benchmark Kospi stock index to record highs.

- 'Strong momentum' -

Along with rival Samsung Electronics, SK hynix is supplying HBM to US industry titan Nvidia for its forthcoming cutting-edge "Vera Rubin" AI platform, expected to further boost the technology's capabilities.

While investors periodically get the jitters over how long the AI boom will last, analysts have said they do not expect the bubble to burst any time soon.

"We expect earnings momentum to remain strong" this year for SK hynix, Kim Young-gun at Mirae Asset Securities said in a note this month.

Reports suggest that memory chip suppliers like SK hynix are entering into long-term supply agreements of three years or more with big tech customers, he wrote.

"In some cases, customers are even seeking options to extend contract durations beyond the initial term, underscoring their emphasis on supply stability."

The rush to build AI data centres has sent orders soaring for HBM, which help the systems process vast amounts of data.

But as chipmakers prioritise the lucrative AI industry, they are producing fewer of the more workaday chips used in everyday consumer electronics like phones and laptops, pushing up device prices.

"Excess demand is expected to persist through the end of the year" for so-called DRAM and NAND memory chips, said a Shinhan Securities report from early April.

That allows "suppliers to maintain the upper hand in pricing power", it said, predicting strong annual results for SK hynix in 2026.

SK hynix said on Thursday that it "plans to continue rolling out new products across both DRAM and NAND flash to address the diversifying memory demand".

It is increasing its chipmaking capacity and plans to spend 19 trillion won to build a new factory in South Korea's Cheongju.

W.Huber--VB