SK hynix: Record Profits from AI, but Shares Fall

What happened?

SK hynix, the world's second-largest memory maker, reported record financial results for the second quarter of 2026 on Wednesday. Revenue reached 79.32 trillion won and operating profit surged 557% year-over-year to 60.54 trillion won, with an operating margin of 76%. Demand for high-bandwidth memory (HBM) for AI servers continues to outpace production capacity. The company raised its 2026 capital expenditure forecast to the range of 40 trillion won, aimed at accelerating the construction of new plants in Cheongju, Yongin, and other advanced facilities.

Despite the record figures, SK hynix shares fell in the session following the earnings release. Analysts noted that market expectations already priced in an exceptional quarter, and the increase in capital expenditure and warnings of a prolonged shortage until 2030 raised concerns about future profitability. Additionally, the company conducted a $26.51 billion ADR offering, the largest by a non-U.S. company, which diluted the value of existing shares.

Why is it important?

This case illustrates the paradox of the AI era: companies that benefit most from demand also face the greatest investment challenges. SK hynix is a key supplier of HBM memory to NVIDIA and other AI chip makers. Its ability to meet demand will determine the pace of AI infrastructure deployment globally. The decision to invest 40 trillion won in additional capacity reflects confidence in long-term demand, but also the risk of overinvestment if growth slows.

CEO Kwak Noh-jung called 2027 the worst year of the shortage and forecast that the crisis will extend beyond 2030. This contrasts with the fall in shares, suggesting the market doubts that massive investments will translate into sustainable profitability. The situation echoes previous boom-and-bust cycles in the semiconductor industry, where overcapacity led to price declines. For example, between 2018 and 2019, DRAM demand contracted and prices fell more than 40%, causing losses across the sector. Now, the HBM market is growing at an annual rate of 45%, according to Tom's Hardware data, but the investment needed to meet that demand is historic.

What consequences will it have?

For consumers, the memory shortage means higher DRAM and NAND prices for several years. SK hynix reported that average DRAM prices rose 30% in the quarter and NAND prices rose more than 50%. DRAM bit shipments in the third quarter will grow only 10%, below the estimated annual demand growth of 20%. This translates into PC and server makers facing higher costs, which will likely be passed on to end consumers. In the storage market, SSDs could rise in price by up to 15% in the coming months, according to analyst estimates.

For the industry, SK hynix's massive investment pressures competitors like Samsung and Micron to increase their own capital expenditure. Samsung has already announced plans to invest 30 trillion won in new HBM lines in 2026, and Micron is expanding its plant in Taichung, Taiwan. The race for HBM and advanced memory capacity could further consolidate the market into three major players, reducing competition and raising entry barriers. For investors, the lesson is that record profits do not always translate into stock gains when the market anticipates higher future costs. The dilution from the $26.51 billion ADR offering also weighed on sentiment, as it increased the number of shares outstanding by approximately 5%.

Additionally, the HBM shortage is affecting AI chip makers like NVIDIA, which relies on SK hynix for its H100 and B200 accelerators. According to industry sources, NVIDIA has had to adjust its shipment forecasts for the fourth quarter of 2026 due to a lack of HBM3E memory. This could delay the deployment of AI data centers and affect companies like Microsoft, Amazon, and Google, which are expanding their computing capabilities.

What should readers know?

• SK hynix reported a record operating profit of 60.54 trillion won (557% year-over-year) and a 76% margin.
• Shares fell because the market already expected exceptional results and is concerned about the 40 trillion won capital expenditure and dilution from the ADR offering.
• The AI memory shortage will extend beyond 2030, according to the CEO, keeping prices high.
• Massive investment in new plants could create overcapacity if AI demand slows, as happened in the 2018-2019 cycle.
• DRAM and NAND prices continue to rise: +30% and +50% respectively in the quarter, and DRAM shipments will grow only 10% in the next quarter.
• The $26.51 billion ADR offering diluted share value and is the largest by a non-U.S. company.
• HBM demand is growing 45% annually, but production capacity cannot keep pace, affecting the entire AI supply chain.