HBM has pricing power in hand! SK Hynix Q4 revenue and profit hit record highs.

Thanks to the continued strong demand in the field of artificial intelligence (AI), the prices of advanced and traditional storage chips have been driven up, leading to record quarterly revenue and profit for South Korean storage chip giant SK Hynix. Data shows that in the fourth quarter of 2025, SK Hynix's revenue increased by 66% year-on-year to 32.827 trillion Korean won, surpassing analyst consensus expectations of 32.132 trillion Korean won; operating profit surged by 137% year-on-year to a record 19.2 trillion Korean won, exceeding analyst consensus expectations of 17.7 trillion Korean won. SK Hynix has established an enviable leading edge in the high-bandwidth memory (HBM) field required for AI chipsets designed by companies like NVIDIA Corporation (NVDA.US), capturing a 61% share of the HBM market. SK Hynix stated, "HBM revenue more than doubled year-on-year, making a significant contribution to last year's record performance." Furthermore, the imbalance of supply and demand in the storage chip industry, with a shift in production capacity towards high-end storage products like HBM, has squeezed the capacity of traditional storage products, leading to shortages and driving up prices of general DRAM and NAND chips used in servers, personal computers, and mobile devices, benefiting SK Hynix. According to data from market research firm TrendForce, contract prices for mainstream DRAM chips like 16GB DDR5 increased by more than four times compared to the same period last year. TrendForce expects contract prices for general DRAM to further rise by 55% to 60% this quarter compared to the previous quarter. The storage chip business, once characterized by intense cycles of boom and bust, is now seeing sustained profitability, which was nearly unimaginable a few years ago and has also boosted the valuation of the entire industry. Data shows that SK Hynix's stock price has doubled since early September last year. SK Hynix also revealed plans to cancel approximately 12.24 trillion Korean won (approximately $8.6 billion) worth of treasury shares next month as part of broader efforts to enhance shareholder returns. The company reiterated its consideration of listing in the United States but has not made a decision yet. The company will hold an earnings conference call on Thursday. Another storage giant, Samsung, will also announce its complete fourth-quarter 2025 performance on Thursday. SK Hynix's strong performance reflects the strong demand for HBM3E. HBM3E is the most advanced high-bandwidth storage version currently in use, adopted by NVIDIA Corporation and major cloud computing operators. It was reported on Wednesday that SK Hynix is the exclusive supplier of HBM3E for Microsoft Corporation's custom AI chip Maia 200. Analyst Cecilia Chan stated that with SK Hynix accelerating the development of HBM4, having higher yields, and signing solid supply agreements with NVIDIA Corporation, it is expected to consolidate its leading position in the high-bandwidth memory market (which is expected to expand at around 25% compound annual growth rate until 2030), although Samsung is catching up. Its plans to invest 19 trillion Korean won (approximately $12.9 billion) in building a chip packaging factory in Cheongju further demonstrate its confidence in HBM demand and strengthen its market leadership. As the company transitions to a net cash position and strong profitability, the improvement in its credit condition should provide upward support for its ratings after Moody's Corporation upgraded its ratings in mid-December last year. Meanwhile, in the backdrop of the imbalance in supply and demand for storage chips, companies like SK Hynix have gained strong pricing power. Richard Clode, portfolio manager of Janus Henderson's global technology team, stated that the current shortage of storage chips is likely to continue, partly due to the strong demand for next-generation HBM storage consuming more wafer capacity, and partly due to overall tight supply. He added, "From the supply side, there are no easy solutions or adjustments to meet this new demand-driven factor. Unlike consumer electronics companies, large-scale cloud service providers and AI customers adopt a completely different mindset when paying for storage chips." "The storage super cycle" is expected to continue until 2028. Nomura analysts believe that the current "storage chip super cycle" that started in the second half of 2025 will last until at least 2027, and meaningful new supply is not expected until early 2028 at the earliest. Nomura stated that investors should continue to be overweight storage leaders in 2026, focusing on the "price-profit-valuation" triple play of storage chips as the main investment theme in 2026, rather than just viewing storage as a single HBM theme. Micron Technology, Inc. is even more optimistic. The company expects that by 2028, the total potential market for HBM will grow at a compound annual rate of approximately 40%, increasing from about $35 billion in 2025 to around $100 billion in 2028; overall demand for NAND tends to follow the continuous expansion of HBM, indicating that the current storage super cycle may last from 2024 to 2028. A recent report by JPMorgan Chase shows that the AI inference wave is transforming NAND flash memory from a "strong cyclical commodity" to a high-growth AI infrastructure asset. The bank believes that with AI workloads shifting from training to inference, and the bottleneck in supply of HDD (hard disk drives) in near-line storage, the NAND market around enterprise SSDs is experiencing unprecedented structural growth. The bank severely underestimates the strategic position of NAND in the AI inference era. JPMorgan Chase predicts that by 2026, the overall average selling price of NAND will increase significantly by 40% year-on-year. Analysts at Citigroup have a more aggressive bullish stance. The analysts at the bank believe that driven by the popularization of AI intelligent agents and the surge in AI CPU memory demand, storage chip prices will undergo a runaway increase in 2026. They have revised their ASP growth expectations for 2026 from an initial 53% to a violent increase to 88% for DRAMs, and from 44% to 74% for NANDs.