SK Hynix shares tumble 60% from peak despite record quarterly earnings

SK Hynix posted record quarterly earnings on the back of an AI-driven memory chip boom — and the market sold off anyway. Investors looked past the historic results and unloaded shares on concerns about the industry's future trajectory and the company's valuation.

SK Hynix closed Wednesday down 9.61 percent at 1.4 million won ($960), according to Korea Exchange. During trading, the stock slid as low as 1.25 million won — a 58.3 percent drop from its intraday high this year of 2.99 million won — pulling the share price back to levels last seen around late April, roughly three months ago.

The chipmaker reported second-quarter sales of 79.3 trillion won and operating profit of 60.3 trillion won, both all-time quarterly records. Average selling prices for DRAM and NAND flash chips rose sharply, and strong demand for high-value products such as server low-power DRAM helped the company beat market expectations.

But investors focused on what lies ahead rather than what was just delivered. Analysts said profit-taking accelerated as doubts grew over the sustainability of AI infrastructure investment, compounding concerns about a potential slowdown in the memory chip cycle and stretched valuations.

Analysts were divided on the outlook. Some flagged the risk of further declines, citing a possible slowdown in AI spending and the threat of oversupply, while others argued the stock had fallen far beyond what the company's fundamentals and earnings warranted.

Lee Su-rim, an analyst at DS Investment Securities, said market anxiety over the durability of AI infrastructure investment had driven the correction, but noted that no signs of oversupply had yet emerged. She forecast that DRAM average selling prices would remain firm in the second half of the year and that quarterly operating profit would continue to grow through 2027.

Lee Min-hee, an analyst at BNK Investment Securities, took a more cautious view, saying hyperscalers were shifting their AI investment approach toward efficiency while chipmakers continued to aggressively scale up capacity despite softening demand. "The risk of oversupply is growing," she said. She also identified CXMT, a Chinese memory chip maker that recently listed, as a factor likely to intensify competition.

The divergence in analyst views was reflected in target price adjustments. BNK Investment Securities cut its target from 1.85 million won to 1.48 million won, citing demand weakness and oversupply risks. Mirae Asset Securities kept its earnings forecasts intact but lowered its target from 4.2 million won to 2.8 million won to reflect sector-wide valuation compression. DS Investment Securities, by contrast, maintained its target of 3.1 million won and a buy rating, saying no oversupply signals had yet appeared.

Kim Young-geon, an analyst at Mirae Asset Securities, said the fundamental business and earnings picture had not changed significantly, but that the market was assigning a lower valuation to the company. "Investor sentiment has been dampened by concerns over China's push to localize memory chip production, but memory chip prices are still rising and the supply shortage continues," he said. He added that the current share price decline was excessive given the company's profitability and financial position, and identified the expansion of long-term supply agreements, the HBM4 shipment schedule and shareholder return policies as the key variables for any future recovery.