$SK hynix(SKHY)$ I've managed a 44% compound annual return over a decade with no leverage or options, just to put some credibility behind this beyond the average forum post.
SK Hynix is selling off on the circular financing and China competition chatter, plus the broader AI bubble fears. But I think that's mostly noise, and here's my bull case for SK going forward. This isn't AI-generated, just my own thinking.
1) The Korean discount on SK doesn't make much sense. A real North Korea/South Korea conflict is unlikely. And since SK trades as an ADR, it's not in any major American index, so institutional demand is structurally lower. It should at least trade at Micron's multiple, but the following points might support an even higher one.
2) SK has the highest HBM market share and better gross margins than Micron given the product mix. HBM carries a higher average selling price than DRAM and sells at a higher net margin. Total sales are also much higher than Micron's.
3) The new Chinese DRAM manufacturer is targeting laptops and phones, not data centers, which is where SK makes most of its profit. This opening exists because Micron and SK have been shifting fabs to HBM, creating a supply gap in the DRAM market. Today's sell-off is running on a false narrative that hyperscalers will switch to Chinese memory products. They won't. Apple is still trying to get clearance just to use DRAM in their phones, and Chinese HBM in data centers is still a long way off.
4) SK is working on HBM4 for next-gen Nvidia data center products. Two things matter here. a) These are built on TSMC 3nm dies using ASML EUV machines that can't be sold to China. There won't be a viable Chinese alternative at that performance level. b) HBM4 yields at ramp will be significantly lower than current HBM yields. That should keep the average selling price elevated through at least 2027, possibly as far as 2029, as next-gen Nvidia racks hit the market and demand for HBM4 picks up while yields gradually improve.
5) Capex is coming in much higher than expected and looks set to continue. Google's earnings showed the spending keeps going. Hardware companies are the main beneficiaries, and SK is well positioned to capture a meaningful share of that hyperscaler capex.
6) High margins with a low forward P/E have historically marked the peak for memory companies. But the long-term purchase contracts paired with growing demand provide a level of visibility that memory companies have never really had before.
Those are some of my thoughts. I'm ignoring the noise and buying every dip. Fair value I see at $285-$300.
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