Earnings Overview
SK Hynix Inc., a major supplier for Nvidia Corp., reported a higher-than-anticipated quarterly profit, largely driven by the global artificial intelligence boom. The company’s recent successes have come despite concerns over US tariff-induced trade disruptions that have forced businesses worldwide to increase their inventory of advanced chips and memory used in PCs and smartphones.
Quarterly Performance
In the March quarter, the company registered an operating income of 7.44 trillion won ($5.2 billion), surpassing the projected 6.6 trillion won. Revenue also climbed to 17.64 trillion won, marking the second-highest quarterly performance for the company following record revenue and operating profit in the previous quarter.
Role in Global Data Center Investments
The impressive results underscore SK Hynix’s pivotal role in the global data center investments. The company has been a key supplier of high-bandwidth memory, a crucial component for Nvidia Corp.’s accelerators used in AI training. Despite the uncertainties and potential volatility due to US tariff policies, SK Hynix has maintained its forecast of high-bandwidth memory (HBM) demand doubling this year from 2024.
Stock Performance and Future Outlook
Since the start of the year, SK Hynix’s stock price has seen a modest increase of around 4%. However, concerns of a global recession triggered by tariffs, along with a reevaluation of AI profitability in light of DeepSeek’s low-cost models, have slowed the momentum that previously saw its shares more than double over the past two years. The stock’s performance reflects the chipmaker’s vulnerability to any slowdown in AI spending and the potential changes in global trade relations brought about by the Trump administration. Analysts warn that if trade tensions tip economies into recession, the demand for all products containing chips could plummet.
Analysts’ Take
Analysts at Morgan Stanley, led by Shawn Kim, have expressed that the earnings season won’t matter as larger forces are at work. They compared the real tariff impact on memory to an iceberg, with most danger unseen and still approaching.
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