[This Week's Industry & Market] Inevitable AI Era... SK Hynix's Position Surpassing the Cycle

Still the No. 1 Net Purchase by Foreign Investors This Year
Monopolistic Position Due to Technical Superiority
HBM Achieves Strong Growth Alone Despite Sluggish Memory
Earnings on the Rise... Sales Expected to Surpass 80 Trillion KRW, Operating Profit 30 Trillion KRW

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Despite the SK Hynix stock price stalling, the securities industry is raising its target price. Given that the era of artificial intelligence (AI) is an unstoppable trend, the company's monopolistic position in the market based on technological gaps is still considered valid.

Still the No. 1 Net Purchase by Foreigners

According to the Korea Exchange on the 12th, SK Hynix is the most purchased stock by foreigners on the KOSPI this year. As of the 10th, foreigners have net bought a total of 1.4461 trillion KRW worth of shares. This amount far exceeds twice that of second-ranked Naver (521.6 billion KRW). Even when adding the net purchase amounts of the 2nd to 5th ranked stocks, it does not surpass SK Hynix's net purchase amount. Although net buying and selling have recently fluctuated, SK Hynix remains the top choice among foreign investors.

The stock price is somewhat stalled. As of the closing price on the 10th, it was 187,900 KRW, representing an 8% return since the beginning of the year. This outperforms the KOSPI's 7.1% return during the same period but is nearly 17% down compared to this year's peak of 227,000 KRW. Nevertheless, the securities industry maintains a target price in the mid-to-high 200,000 KRW range and a "buy" investment rating. According to FnGuide, the consensus target price for SK Hynix is 276,750 KRW, still above SK Hynix's all-time high of 248,000 KRW. Korea Investment & Securities recently raised its target price from 270,000 KRW to 300,000 KRW. Except for iM Securities, which proposed the lowest target price of 200,000 KRW, most securities firms' target prices are clustered between 270,000 KRW and 300,000 KRW.

Monopolistic Position Due to Technical Moat

The reason securities firms are optimistic is clear. The AI era is inevitable, and SK Hynix's position in that market is solid.

As AI services advance, demand for high-performance memory semiconductors such as High Bandwidth Memory (HBM) to increase data processing speed is surging. Some predict that market growth may slow due to export regulations and tariff competition among countries. However, the growth of the AI era has become an unstoppable trend. AI models are becoming more complex, and big tech companies are making AI-related businesses a core mid-to-long-term strategy. Although there may be short-term fluctuations, investment is expected to steadily increase.

Clark Tseng, Senior Director at the Semiconductor Equipment and Materials International (SEMI), explained at the 'Semicon Korea 2025' event held in South Korea last month, "The capital expenditure of top big tech companies increased from $80 billion in 2018 to $200 billion last year, and it is expected to reach $250 billion this year," adding, "The share of servers and data centers in the overall semiconductor market will expand to 34% by 2030."

The expansion of AI data center construction leads to increased demand for HBM. Ultimately, SK Hynix's product supply opportunities are expected to expand further. SK Hynix is virtually the exclusive supplier of HBM to Nvidia, which leads the AI accelerator market.

While the year-on-year growth rate of smartphone and PC sets is expected to be in the single digits, AI server shipments are projected to grow by 30%. Even if DRAM slows down, HBM, which SK Hynix virtually monopolizes, remains strong. As of the end of January, memory suppliers' inventory levels were about 9-10 weeks for DRAM and 14-15 weeks for NAND. Contract prices for most products such as DDR4, DDR5, and LPDDR5 are expected to decline compared to the previous quarter. However, SK Hynix is different. The mixed average selling price (ASP) of DRAM is expected to rise in the first quarter due to the expansion of HBM sales, especially the increased proportion of HBM3e (5th generation) 12-stack.

Bright Earnings Outlook... Sales Expected to Exceed 80 Trillion KRW This Year

SK Hynix's earnings are expected to steadily rise. According to the Financial Supervisory Service's electronic disclosure system, SK Hynix recorded sales of 32.7658 trillion KRW and an operating loss of 7.7303 trillion KRW in 2023. However, within a year, sales doubled to 66.193 trillion KRW, and operating profit explosively grew to 23.4673 trillion KRW. The earnings forecast (consensus) for this year is also solid, with sales estimated at 81.8642 trillion KRW and operating profit at 32.7515 trillion KRW, representing increases of 23.7% and 39.6%, respectively, compared to the same period last year.

Concerns exist about reduced demand for high-performance AI chips and slowed HBM growth due to the emergence of China's cost-effective AI model DeepSeek. However, it is analyzed that the spread of affordable AI models will increase demand and accelerate the era of AI becoming ubiquitous. Minhee Lee, a researcher at BNK Investment & Securities, said, "The spread of affordable AI models will play a positive role in expanding the AI ecosystem by lowering development costs for various applications," adding, "With Samsung Electronics unlikely to actively enter the market for HBM 12-stack or higher products this year, HBM supply remains tight, and SK Hynix's HBM-based earnings growth will continue."

There are variables. The strategies and plans of customers like Nvidia frequently change, shortening product life cycles. To maintain a dominant market share as the primary supplier, SK Hynix must consistently meet delivery schedules despite changing customer product launch timelines. Meeting these conditions is also essential to secure pricing negotiation power during the early stages of new product launches. Considering this, SK Hynix remains the unrivaled supplier in the HBM market. Researcher Min-sook Chae of Korea Investment & Securities emphasized, "It is important to note that SK Hynix is the only company capable of supplying all products, from Nvidia's H20-targeted HBM3 8-stack to GB300-targeted HBM3e 12-stack."