SEOUL -- One of the world's biggest memory-chip makers reported a record $64 billion quarterly profit on Wednesday -- and its stock price still fell nearly 10%.
Welcome to the most fickle of stock markets, where earnings that would have been unthinkable a year or two ago are now treated as a disappointment.
South Korea's SK Hynix, which specializes in memory chips for electronics and artificial-intelligence systems, saw its market value surpass $1 trillion in late May on the South Korean stock exchange. On July 10, the firm made its U.S. trading debut on the Nasdaq, raising more than $26 billion.
The good news seemingly continued late last week. SK Group, which controls SK Hynix, announced a $500 billion partnership with Nvidia for next-generation memory supply and AI data centers, giving details about an agreement reached earlier.
Then came the blowout earnings report on Wednesday. In just three months, SK Hynix earned a net profit of 93.9 trillion won, equivalent to around $64 billion. That was 13 times the figure a year ago and exceeded the company's combined net profit for the past five years.
Yet the figure fell short of some bullish investor expectations and fanned fears about the durability of the AI boom. The stock fell as much as 19.6% before finishing down 9.6%. Shares of fellow South Korean chip maker Samsung Electronics also fell, as did Japanese flash-memory maker Kioxia, which in June was briefly the most valuable company on the Tokyo stock market before seeing shares fall about two-thirds from their peak.
Share prices of the Asian chip makers recovered somewhat on Thursday after Samsung said its net profit rose 14-fold in the second quarter to the equivalent of $48.6 billion. In an earnings call, Samsung offered reassuring guidance to investors, saying it was making long-term deals with big data-center customers that would keep it busy for years.
Data centers require large quantities of memory chips to train and operate AI systems, and most analysts believe demand will continue surging. That has lifted shares of the three leading memory-chip makers -- SK Hynix, Samsung and Micron Technology of the U.S. SK Hynix's shares have been particularly sought after because of its expertise in high-bandwidth memory, a specialized type of chip for AI computing.
Last month, SK Hynix and Samsung said they would collectively invest more than $500 billion in a new chip-making hub in southwestern South Korea.
Four leading Silicon Valley hyperscalers -- Microsoft, Meta Platforms, Amazon and Alphabet's Google -- together plan to spend as much as $670 billion this year on AI-related capital expenditures.
But after SK Hynix's huge stock run-up since last year, any suggestion that its growth might have limits is enough to spook investors.
One set of concerns involves circular financing deals in the AI business in which chip makers help customers buy more chips. Such fears were reignited by a Wall Street Journal report that Nvidia was in talks to provide a roughly $250 billion backstop for OpenAI that would help finance a data-center project.
Another concern is the growing might of China in semiconductors. On Monday, Chinese memory-chip maker CXMT went public in Shanghai and instantly became the most valuable company listed in mainland China.
CXMT shares gained 12.7% Wednesday, giving the company a market capitalization of more than $500 billion, which isn't far short of SK Hynix's $705 billion as of the close of trading in Seoul Wednesday.
China is also making advances in building homegrown lithography machines used in chip making, although its companies remain far behind ASML of the Netherlands.
Still, Kim Young-gun, a semiconductor analyst at Mirae Asset Securities in Seoul, called SK Hynix's stock move "an excessive correction relative to the fundamentals." Kim pointed to the company's earnings, order books from customers such as Google and rising spot prices for memory as evidence that the boom is continuing and keeping supply tight.
Nomura, a Japan-based brokerage, projects that revenue for DRAM chips -- one of the two major types of memory -- will surpass $2 trillion by 2030, a roughly 12-fold increase from 2025.
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