Bank of America supports SK Hynix (SKHY.US): the momentum of the storage super cycle is strong, and shareholder returns aim for 1 trillion won.

Bank of America Corp maintains a "Buy" rating on South Korean memory chip giant SK Hynix (SKHY.US), with a target price of $250. Bank of America Corp emphasized several investment highlights, including a storage supply shortage, an increase in long-term agreements (LTAs), and high profit margins. The analyst team at Bank of America Corp, led by Simon Woo, pointed out the so-called "downgrade" phenomenonwhere the storage capacity per device or GPU/CPU is reducedcurrently mainly occurs in the PC, smartphone, and low-end GPU/ASIC markets. Bank of America emphasized that this reflects a shortage of memory chip supply rather than a decline in end demand. For high-end applications, including the next-generation GPUs, relevant manufacturers will continue to adopt configurations with high memory content and will not experience a downgrade. Although some new fabs are under construction, cleanroom space remains tight, and the capacity expansion of DRAM and NAND wafers is restricted. Considering these factors, Bank of America concludes that memory supply will remain tight, even in the long term. On the business model front, Bank of America Corp noted that as LTAs continue to increase, the average selling price (ASP) of memory chips is expected to stabilize and will no longer exhibit the significant fluctuations seen in the past. Regarding shareholder returns, SK Hynix reaffirmed a policy of over 50% shareholder return rate, which includes a recently announced 40 trillion won stock buyback plan. Bank of America expects that, in addition to this buyback, SK Hynix will also distribute approximately 30 trillion won in dividends based on 2026 performance, with a dividend to buyback ratio of about 40:60. The Woo team stated, "We believe that the remaining free cash flow (FCF) available for distribution is expected to be paid either in dividends or buybacks combined in April 2027 after the annual shareholder meeting in March 2027. With the memory chip super cycle driving both ASP and sales growth, SK Hynix's free cash flow in 2027 is expected to exceed 200 trillion won. This will support the company in achieving a total shareholder return amount of over 100 trillion won in 2027." On Wednesday after U.S. stock markets closed, NVIDIA Corporation's strong revenue guidance boosted chip stocks, and SK Hynix's ADR rose 5% to $165.92. Earlier, it was reported that Samsung Electronics and SK Hynix plan to increase their supply of 8-layer HBM4 memory to NVIDIA Corporation in the second half of this year. On Thursday morning, the South Korean Kospi index rose by as much as 2.8%, and SK Hynix's Korean stock increased by 3.7%.