Nvidia supplier SK Hynix boosts investment plan after record Q2 profit

SK Hynix reported a record Q2 operating profit of 9.2 trillion won ($6.69 billion), a 69% year-over-year increase that exceeded forecasts, driven by robust demand for its high-bandwidth memory (HBM) chips essential for generative AI and customer stockpiling. The Nvidia supplier, which overtook Samsung as the top memory chip maker in Q1 due to its HBM leadership, projects doubling HBM sales in 2024 and has increased its 2025 capital expenditure to support AI chip growth, even as it braces for rising competition and potential U.S. tariffs.

Analysis

SK Hynix reported a record operating profit of 9.2 trillion won for the April-June quarter, a 69% year-over-year increase that surpassed analyst forecasts of 9.0 trillion won. This performance was primarily fueled by robust demand for its high-bandwidth memory (HBM) chips, which are essential components in generative AI chipsets supplied to key customers like Nvidia. The company's leadership in this high-margin segment enabled it to overtake Samsung Electronics as the world's top memory chip maker in the first quarter. Reinforcing its optimistic outlook, SK Hynix announced an increase in its 2025 capital expenditure plan and projects that its HBM chip sales will double for the full year compared to 2024. However, the results were also partially inflated by customer stockpiling in anticipation of potential U.S. tariffs, a factor that introduces geopolitical risk. The company also faces rising competition from rivals aiming to supply advanced chips to Nvidia, which could impact future market share and pricing power.

Key Decisions for Investors

• Given SK Hynix's strong earnings beat and dominant position in the HBM market, investors might view the stock favorably, but should closely monitor for signs of intensifying competition from rivals like Samsung or any concrete developments regarding U.S. tariffs.
• The results serve as a strong positive indicator for Nvidia (NVDA), confirming sustained, high-volume demand for its AI accelerators, though investors should watch for any commentary from Nvidia on diversifying its HBM supply chain.
• The report underscores a near-term competitive gap for Samsung Electronics (KS:005930) in the critical HBM segment; its future earnings may depend on its ability to accelerate HBM production and close this gap with SK Hynix.