SK Hynix Hits Fresh Highs, But One Analyst Warns the AI Party May Be Peaking

BNK Investment downgrades SK Hynix as record Q1 profits face margin compression from HBM4 transition and stabilizing AI demand.

The numbers coming out of SK Hynix are the stuff of corporate legend. Revenue of 52.58 trillion won in the first quarter — nearly triple the 17.64 trillion won recorded a year earlier. Operating profit of 37.61 trillion won, five times the prior-year figure. An operating margin that swelled to 72 percent from 42 percent. And the stock, already up roughly 90 percent since January, tacked on another 5.5 percent on Monday to hit a fresh 52-week high of 1,289,000 won.

Yet for the first time in nine months, a major analyst has stepped in front of the rally. BNK Investment & Securities downgraded SK Hynix from "Buy" to "Hold" on Monday, keeping its price target at 1.3 million won. Analyst Lee Min-hee cited concerns that the momentum powering the chipmaker's extraordinary run could fade in the second half of the year.

The Margin Question

The warning centers on a paradox at the heart of SK Hynix's business. The very technology driving its record profits — the shift to next-generation memory chips — may also be about to compress margins. BNK expects operating profit for the full year 2026 to come in at 177 trillion won, a figure that falls well short of earlier internal projections.

The issue is pricing dynamics. As SK Hynix ramps up production of its sixth-generation HBM4 memory, the transition could slow the growth of average selling prices. Meanwhile, the massive capital spending by global hyperscalers on artificial intelligence infrastructure — the demand engine that has supercharged SK Hynix's results — appears to be stabilising at elevated levels rather than accelerating further.

Ki Tae Kim, the company's head of HBM sales, told analysts on the earnings call that customer inquiries for HBM deliveries over the next three years already far exceed current production capacity. That kind of forward visibility is rare in the semiconductor industry, but it also underscores the scale of the investment required to meet demand.

Building for the Future

SK Hynix is betting big on its ability to close that gap. On April 22, the company broke ground on P&T7, a new advanced packaging facility in Cheongju, with an investment of 19 trillion won. Completion is scheduled for the end of 2027. The plant is designed to address the bottleneck in high-bandwidth memory packaging that has become one of the most critical constraints in the AI supply chain.

The company has also sent final samples of HBM4 to Nvidia for certification on the Vera-Rubin GPU platform. Mass production is slated for the second half of 2026.

A Structural Catalyst Arrives

Beyond the fundamentals, a regulatory shift in Seoul is set to change how investors can trade SK Hynix shares. South Korea's cabinet approved amendments to the Capital Markets Act on April 21, paving the way for the country's first domestically listed 2x leveraged single-stock ETFs. SK Hynix and Samsung Electronics are expected to be the underlying assets.

The tax treatment is a key attraction. Domestic ETFs are subject to a flat 15.4 percent tax on trading gains, a more favourable regime than the alternative of going through foreign markets. The products could begin trading as early as May 22. Their arrival is likely to increase intraday volatility in SK Hynix shares, a development the company's management is aware of as it reviews shareholder return measures — including potential dividend adjustments and share buybacks — for the remainder of the year.

The Classic Memory Business Is Still Firing

While the AI narrative dominates headlines, the traditional memory market continues to deliver. Enterprise SSD prices surged more than 50 percent in the first quarter, and analysts expect a similar jump in the current quarter. SK Hynix is expanding NAND production at its facility in Dalian, China, to capture that demand.

There is also a potential competitive tailwind. Samsung Electronics faces the prospect of a strike at the end of May, which could push customers toward SK Hynix for near-term supply.

The Bigger Picture

The broader market remains divided on SK Hynix's valuation. Some brokers have sharply raised their earnings estimates in recent weeks. Others worry about the late-cycle dynamics of the AI investment boom. The global technology industry has committed roughly $700 billion to AI infrastructure, and the question of whether that spending will generate adequate returns now demands concrete answers.

Those answers may come within days. Microsoft and Alphabet are both due to report quarterly results this week, offering the first hard data on whether the hyperscalers' appetite for AI hardware is still growing. If capital expenditure comes in lighter than expected, SK Hynix's current valuation — already stretched by any historical measure — could come under immediate pressure.

For now, the stock is riding a wave of momentum that few predicted. But with a fresh analyst downgrade on the books and a pivotal earnings season ahead, the next chapter for SK Hynix may test whether its record run has further to go.