AI storage demand continues to surge! SK Hynix's Q1 profits soar five times, revenue surpasses 5 trillion Korean won for the first time.

South Korea's storage chip giant, SK Hynix, announced another record-breaking quarterly profit and revenue on Thursday, with its product prices continuing to soar due to strong demand in artificial intelligence. Despite profits meeting expectations, revenue fell short. According to LSEG data, SK Hynix's first quarter revenue was 52.58 trillion Korean won ($35.55 billion), below the expected 53.55 trillion won, nearly triple year-on-year growth, crossing the 50 trillion won mark for the first time. Operating profit was 37.61 trillion won, slightly below the expected 37.92 trillion won; operating profit increased fivefold year-on-year, almost doubling from the previous quarter, and the operating profit margin also reached a record high of 72%. AI Boom Driving Performance The strong performance highlights the continued growth momentum in the global storage chip market, as demand from large tech companies building AI data centers has constrained chip supply and raised prices for high-end and common storage chips. This Korean chip maker is benefiting from the spending boom in the field of artificial intelligence, which is reshaping the memory industry landscape and offsetting concerns about supply chain disruptions caused by the conflict in the Middle East. SK Hynix produces memory chips for storing data, which are widely used in various devices ranging from servers to smartphones and laptops. As a leading supplier of High Bandwidth Memory (HBM) globally, SK Hynix is benefiting from the surge in demand for artificial intelligence, as HBM is widely used in AI data centers. HBM falls within the category of Dynamic Random Access Memory (DRAM) - a semiconductor memory used for storing data and program code, widely used in personal computers, workstations, and servers. Leveraging its early leadership position in HBM and being a key supplier to NVIDIA Corporation, the leading AI processor manufacturer globally, SK Hynix has surpassed competitors such as Micron and Samsung in the DRAM market. SK Hynix stated in its financial report, "Despite the first quarter being typically a seasonal off-peak period, strong demand continued due to increased investments in AI infrastructure. As AI transitions from large model training to the intelligent agent AI stage, the memory demand foundation for DRAM and NAND flash is continuously expanding." According to market research firm TrendForce, contract prices for some DRAM chips in the first quarter increased by nearly 83% from the previous quarter, while prices for some NAND products surged by about 160%. However, according to Counterpoint Research, Samsung retook the top spot in DRAM chip revenue in the previous quarter. On the other hand, SK Hynix continues to dominate in the HBM field, holding a market share of 57%. Counterpoint added that the DRAM market has grown by over 30% for two consecutive quarters due to rising memory prices, driven by increased demand for HBM and constraining manufacturers' capacity, resulting in widespread memory shortages in recent quarters. Reportedly, SK Group Chairman Chey Tae-won stated in March 2026 that due to continued demand exceeding supply for HBM, tight capacity, and a global shortage of semiconductor wafers, the situation may continue until 2030. He also added that increasing wafer supply would take at least four to five years, and the shortfall is expected to exceed 20%. Counterpoint Research analyst MS Hwang told the media that the first-quarter performance of memory companies "demonstrated strong profitability and indicated that the memory required for AI inference is far greater than expected, with all companies scrambling to ensure supply." He added that even if the trend of rising memory prices slows in the second half of the year, SK Hynix's profit may still continue to grow throughout the year. However, if the Middle East conflict continues past the second quarter and lingers, further disruptions in the supply of key semiconductor manufacturing materials such as helium could pose some challenges for the company. Hwang noted that this situation could have a significant impact on the entire AI supply chain, although it is not expected to become a long-term issue. Increased capital expenditure to meet capacity expansion The company reiterated its plan to "significantly" increase capital expenditure this year, highlighting the soaring prices of memory chips supporting global AI development. Sanjeev Rana, Head of Research at CLSA Securities Korea, stated that with low customer memory inventories and limited supply growth, "profits will continue to grow strongly over the next few quarters." CLSA Securities Korea forecasts SK Hynix's capital expenditure to increase by 45% this year. Rana added, "Market demand is strong, and companies are finding ways to increase capacity." To meet market demand, SK Hynix announced in January that its 2026 capital expenditure will significantly increase from 2025. Last month, the company announced plans to spend $8 billion to purchase advanced extreme ultraviolet lithography chip manufacturing equipment from ASML Holding NV ADR. Competitor Samsung plans to invest over 110 trillion won this year in chip capacity expansion and research and development, with record funding aimed at securing a leading position in the AI semiconductor field. "Memory is gradually shedding its commodity characteristics influenced by boom and bust cycles, as it is now designed in conjunction with the AI accelerator roadmap," said Dave Mazza, CEO of New York-based Roundhill Investments before the earnings release. "More memory companies are signing long-term contracts with hyperscale data center operators, fundamentally changing the industry's cyclicality." Storage chips moving away from cyclicality into a "super cycle"? Meanwhile, investors are discussing whether the emergence of AI will trigger a super demand cycle, helping SK Hynix and its competitors break free from decades-long cycles of boom and bust and entering a period of structural prosperity. The stock valuations of memory chip manufacturers still remain significantly lower than other top AI chip companies like NVIDIA Corporation and the leading semiconductor foundry Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. Despite storage chip stocks significantly outperforming the market in recent months, their valuations are still comparatively low. Since the end of August last year, Samsung's stock price has doubled, SK Hynix's has quadrupled, while Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has only risen by 77%, lagging far behind. This trend is also evident globally, from Micron Technology, Inc. in the United States to Kioxia Holdings in Japan, the forward price-to-earnings ratios of other rising storage and flash memory companies are still below 10. Meanwhile, the AI processor leader NVIDIA Corporation trades at 22 times earnings. Skeptics believe that due to significant fluctuations in memory returns and its historical correlation with overall economic cycles, the lower valuation is justified. However, optimists believe that this time is different because AI is driving unprecedented demand. The exponential price growth in recent months is hard to ignore. According to data from market tracking firm DRAMeXchange, the benchmark contract price of 8GB DDR4 PC memory has risen for 11 consecutive months, reaching around $13 last month. This continuous upward trend is boosting the profit margins of SK Hynix's core business. The increase in NAND flash prices has also contributed to this trend. According to Future Asset Securities Limited, the average selling price of DRAM in the first quarter increased by 60.8% from the previous quarter, while the average selling price of NAND increased by 55.3%. With increased investments in data centers, the demand for enterprise-grade solid-state drives has significantly increased. It is expected that memory chip prices will continue to rise this quarter, indicating another quarter of strong profit growth, as AI companies race to acquire advanced chips for their infrastructure deployment. Some analysts predict that the rate of price increases will slow down after the second quarter, but the supply constraints will continue until new capacity comes online, which may take over a year to complete construction. Samsung Electronics and SK Hynix are expected to see net profits surge by 400% and nearly 300% respectively this year, far exceeding the approximately 50% increase for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. Samsung's net profit for this year is estimated to be $151 billion, while SK Hynix's is $115 billion, both surpassing Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's $81 billion. Some investors believe that once the market sees more evidence that their profit growth is more structural than cyclical, the valuation of storage stocks will catch up. However, while Chey promised to expand capacity in February, he also warned that in a time of rapid technological change, losses could still occur in the future. He also emphasized the increasingly severe infrastructure challenges. He stated that SK Group is currently considering building power plants near AI data centers, as unmet energy needs could have "disastrous" consequences. "In a sense, we are in a new paradigm in the memory realm," said Jorry Noeddekaer, Head of Global Emerging Markets and Asia at Polar Capital in London before the earnings announcement. "But we do not agree with the view that there will never be cyclical fluctuations in the memory sector."