SK Hynix’s Paradox: Record HBM Profits and a 40% Rout as Leveraged Bets Unravel Ahead of Earnings

SK Hynix set to report record Q2 earnings, but stock is 41% below peak due to ADR offering turmoil, leveraged ETF losses, and margin calls.

SK Hynix is about to report what analysts predict will be its strongest quarterly earnings ever, yet the stock is nearly 41% below its late-June peak. The disconnect between operational momentum and market turmoil has rarely been starker for the world’s leading supplier of high-bandwidth memory (HBM) chips. When the company releases second-quarter results on 29 July, the numbers will land in the middle of a crisis driven not by fundamentals, but by the violent unwinding of leveraged retail bets and a cross-border arbitrage squeeze.

The chaos traces directly to SK Hynix’s $26.5 billion American depositary receipt (ADR) offering, which closed on 14 July. The deal was massively oversubscribed — at seven times demand — and the ADRs surged 12% on their Nasdaq debut. But euphoria quickly turned to pain. The next trading day in Seoul, the stock crashed 15%, its steepest single-day drop in roughly two decades, forcing the Kospi to halt trading temporarily. The ADR premium ballooned to as much as 50% over the Seoul-listed shares before compressing to around 22%, a move that has already erased about 41% of the premium. Chairman Chey Tae-won inadvertently added fuel by posting the Nasdaq ticker on Instagram — a post he later deleted — just as the spread was peaking.

For South Korea’s retail investors, the volatility proved devastating. Since late May, they had poured the equivalent of $9.5 billion into leveraged single-stock ETFs tracking SK Hynix and Samsung Electronics. The KODEX SK Hynix 2x Leverage ETF has since lost roughly 70% of its value from its June high. Across the market, more than one million brokerage accounts triggered margin calls, with between 320,000 and 360,000 accounts fully liquidated. Regulators responded by tightening margin requirements on 16 leveraged products, and on the first day of the new rules, turnover in those funds hit $8.6 billion.

Chey himself acknowledged the market’s concerns, but from a different angle. He described current memory chip prices as “abnormally high” and said they should normalize. Yet he simultaneously forecast that AI-driven demand would surge 60% to 100% in 2027 versus 2026, while the broader memory market expands 50% to 60%. SK Hynix CEO Kwak Noh-jung went further, warning that the worst supply shortage is expected in 2027. Chey also outlined capacity expansion plans in Yongin, Honam, and the United States, and suggested that bottlenecks could shift from chips to power cables, electrical equipment, and raw materials.

The fundamental case for a supercycle remains intact. SK Hynix holds 58% to 61% of the HBM market, far ahead of Samsung and Micron. In fiscal 2025, it posted an operating profit of 47.2 trillion won, overtaking Samsung Electronics’ 43.6 trillion won. For the coming quarter, consensus forecasts call for revenue of roughly 82 trillion won, operating profit between 63 trillion and 66 trillion won, and a margin near 76% to 77%. Analyst estimates are buoyed by Micron’s blowout quarter — revenue of $41.46 billion, up 346% year over year and 16% above expectations — and its CEO’s statement that memory constraints are “locked in through calendar 2027.”

Bears counter that the stock’s valuation has already priced in too much. Risks include a weak Samsung outlook, profit-taking on the ADRs, a margin below 70%, or any sign of easing supply. HSBC draws an analogy to the 1990–1995 supercycle, when a new computing era coincided with multiyear capacity constraints, and argues that the pricing shift to HBM4 alone could boost selling prices by 35% next year. Meritz Securities data shows DRAM supply coverage falling from 75%–80% currently to around 60% by 2027.

Technical indicators suggest the stock is not yet in oversold territory. The relative strength index stands at 41.2, neutral to slightly oversold, while the price remains well above its 100-day moving average of 1,626,351 won — a sign the long-term uptrend is not broken despite the sharp correction. If the operating margin holds near the 76%–77% consensus and management confirms capacity is booked through 2027, the bullish thesis will gain fresh support. A margin materially below 70%, combined with easing supply commentary, could deepen the selloff.

The next big catalysts are earnings from US hyperscalers. Alphabet reports on 22 July, followed by Microsoft and Meta on 29 July, and Amazon on 30 July. Hana Securities estimates that if Alphabet beats expectations, SK Hynix could rally 17% on average over the following four weeks; a miss would clip about 3%. The four hyperscalers are expected to spend roughly $725 billion on capex in 2026 and nearly $900 billion in 2027.

An additional headwind could come from Chinese DRAM maker CXMT, which plans to debut on Shanghai’s Star Market on 24 July, raising about $8.6 billion in what is being called Asia’s largest new listing this year. CXMT has already grabbed 8% of the DRAM market, up from 3% in a single quarter.

For SK Hynix, the earnings report on 29 July will provide the first hard data in weeks to test whether the supercycle narrative still holds — and whether the stock can finally decouple from the margin-call-driven chaos that has overshadowed its strongest operational performance in history.