SK Hynix, a key supplier to Nvidia, reports its highest quarterly profit in six years due to its leadership in AI chips.

• Since the second quarter of 2018, the highest level of operating profit in the June quarter was achieved, rebounding from a loss of 2.88 trillion won in the same period a year ago.
• Due to the increase in demand for AI memory, including high-bandwidth memory, SK Hynix experienced a 32% increase in revenue compared to the previous quarter.

As it maintains its leadership in advanced memory chips essential for artificial intelligence computing, SK Hynix reported its second-quarter profit reached its highest level in 6 years on Thursday.

LSEG SmartEstimate, which is based on analysts' forecasts, shows SK Hynix's second-quarter results.

• 16.42 trillion Korean won is equivalent to about $11.86 billion.
• Operating profit: 5.47 trillion Korean won, vs. 5.4 trillion Korean won

Since the second quarter of 2018, the highest level of operating profit in the June quarter was achieved, rebounding from a loss of 2.88 trillion won in the same period a year ago.

The company's revenue from April to June grew 124.7% compared to the same period last year, reaching a record high of 8.8 trillion won, according to LSEG data available since 2009.

Due to the increase in demand for AI memory, including high-bandwidth memory, SK Hynix experienced a 32% increase in revenue compared to the previous quarter.

High-bandwidth memory chips for AI chipsets are supplied by the South Korean giant to companies such as Nvidia.

According to SK Kim of Daiwa Capital Markets, in a June 12 note, we anticipate that tight HBM and memory supply will continue until 2025 due to a bottleneck in HBM production.

Kim stated that we anticipate a favorable pricing environment to persist and SK Hynix to achieve strong earnings in 2024-25, thanks to its competitive edge in HBM for AI graphics processing units and high-density eSSD for AI servers, resulting in a revaluation of the stock.

The demand for high-bandwidth memory chips has increased due to the rapid adoption of AI, driven by powerful language models like ChatGPT.

High-end memory chips are predicted to remain in short supply this year due to the AI boom, as warned by analysts. SK Hynix and Micron have already sold out their high-bandwidth memory chips for 2024, and their stock for 2025 is almost depleted.

These models need a lot of high-performance memory chips to remember details from past conversations and user preferences, which enables them to generate humanlike responses.

Nvidia has relied on SK Hynix as its primary supplier of high-bandwidth memory chips, specifically HBM3, until Samsung allegedly passed tests for the use of its HBM3 chips in Nvidia processors for the Chinese market.

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