Under the wave of AI, SK Hynix's Q4 profit surged more than 20 times, but investors are not "buying it".

SK Hynix's stock price fell by 4.7%, despite the company announcing record quarterly profits and moderate capital expenditure plans. However, this failed to impress investors betting on the endless demand for advanced storage chips in the artificial intelligence (AI) wave. As the main supplier of high bandwidth memory (HBM) for NVIDIA Corporation (NVDA.US), SK Hynix reported a more than 20-fold increase in operating profit in the fourth quarter of last year, reaching 80.8 trillion Korean won (equivalent to 5.6 billion US dollars), with a 75% increase in revenue, meeting analysts' expectations. The South Korean company also raised its annual dividend by 25% to 1,500 Korean won per share and expects HBM sales to more than double this year. Data shows that SK Hynix's revenue and operating profit for 2024 also broke previous records. These data highlight that SK Hynix remains in a leading position in the HBM field needed for NVIDIA Corporation's AI training accelerators, while its long-time competitor Samsung Electronics remains at a disadvantage. These data may also help alleviate concerns that the AI spending frenzy at large tech companies like Microsoft Corporation and Meta Platforms Inc. has peaked. The AI spending frenzy received a new catalyst this week. Oracle Corporation (ORCL.US), OpenAI, SoftBank Group of Japan, and Abu Dhabi-backed MGX Corporation announced plans to invest in a joint venture, with an immediate investment of $100 billion for data center construction, aiming to attract $500 billion in investment within four years. This "Stargate" project, promoted by former US President Donald Trump, boosted the stock prices of AI companies such as NVIDIA Corporation and Arm Holdings. Nevertheless, SK Hynix's stock price saw its largest decline in a week, erasing the 30% gain the South Korean chipmaker has seen so far this year. The company's price-to-book ratio was around 2.8 before Thursday, significantly higher than the three-year average of 1.6. Sanjeev Rana, an analyst at Lyon Securities Korea, said, "SK Hynix will be a major beneficiary of the Stargate project. They have a clear advantage in both product quality and production volume... Competitors will need time to catch up." SK Hynix is far ahead of Samsung and Micron Technology, Inc. in designing and supplying HBM. The company plans to launch cutting-edge 16-layer HBM4 chips in the second half of next year. The company also stated that capital expenditures for this year will slightly increase. In the fourth quarter of last year, HBM accounted for 40% of SK Hynix's total revenue from DRAM chips. The company predicts that the demand for this high-end storage will continue to increase as investments in AI servers grow and the importance of AI inference becomes more prominent. SK Hynix stated that while a consumer market inventory adjustment is expected, sales of AI-equipped personal computers and smartphones will expand, driving growth in the second half of the year. SK Group Chairman Choi Tae-won said at the Consumer Electronics Show (CES) in Las Vegas, "SK Hynix has accelerated development to meet NVIDIA Corporation's requirements." At that event, he met with NVIDIA Corporation co-founder Jensen Huang to discuss ways to deepen their relationship. SK Hynix is committed to providing customers with next-generation HBM products this year. The company announced last year that it will invest around $15 billion in South Korea to meet the growing demand for high-end chips. Additionally, the company plans to invest $3.9 billion to establish an advanced packaging factory and AI product research center in Indiana. It is worth noting that ahead of SK Hynix's performance announcement, retail investors in South Korea were reducing their holdings of SK Hynix stocks, with monthly withdrawals possibly reaching the highest level in at least ten years. Local investors are turning to non-tech beneficiaries under the Trump administration policy, as well as some small Korean domestic stocks.