SK Hynix Cashes In on AI Memory Fever With Record Spending and Margins That Outshine Nvidia

South Korean chipmaker posts record Q1 2026 earnings with 72% margin, led by AI-driven HBM demand, massive capacity expansion, and Samsung labor strike boosting orders.

The numbers coming out of SK Hynix are rewriting the rulebook for chipmakers. An operating margin of 72 percent in the first quarter of 2026 — comfortably ahead of Nvidia's 65 percent — is not something a commodity memory producer is supposed to deliver. Yet that is exactly where the South Korean giant finds itself, thanks to a perfect storm of insatiable AI demand, constrained supply, and a rival's labor troubles.

Revenue hit 52.58 trillion won for the quarter, with operating profit surging to 37.61 trillion won. The company disclosed that every product line — DRAM, NAND, and High-Bandwidth Memory — is completely sold out. Some customer orders simply cannot be fulfilled. SK Hynix is now racing to build enough capacity to keep pace with demand that is forecast to outstrip planned HBM4 output for years.

A $14 Billion Bet on Yongin

To close that gap, the company is pouring money into new fabrication lines at an unprecedented rate. Capital expenditures in the first quarter alone reached 7.35 trillion won, up nearly 22 percent year-on-year. The bulk of that sum is being funneled into plant construction and equipment.

The centerpiece is a massive semiconductor cluster in Yongin, where construction is being accelerated. The first fab there is scheduled for completion in May 2027. When fully ramped, it will add roughly 350,000 wafers per month, pushing SK Hynix's total monthly capacity toward 900,000 wafers.

In the nearer term, the M15X factory in Cheongju has already entered pilot production after more than 20 trillion won in investment. Mass manufacturing at that site is slated to begin in November 2026, producing HBM3E, HBM4, and DRAM for the next-generation HBM4E.

Research Spending and a Talent War

SK Hynix is not just throwing money at bricks and mortar. Research outlays hit 2.55 trillion won in the first quarter, and the full-year budget for both capex and R&D has been set at 50 trillion won — up sharply from 36.6 trillion won the previous year.

The company has also been poaching talent aggressively. Over the past four months, it lured roughly 200 engineers away from archrival Samsung. Since September, a portion of operating profit has been channeled into a performance bonus pool, adding financial incentive to the recruitment drive.

Samsung Strike Adds Fuel to the Fire

Samsung's own struggles are proving to be SK Hynix's opportunity. Starting May 21, around 50,000 Samsung workers plan to walk out for 18 days in what could be a historic labor dispute. For a global AI supply chain that relies heavily on Samsung's HBM shipments — the company was the first to mass-produce sixth-generation HBM in February — the timing is precarious.

Analysts expect that any prolonged disruption will divert additional orders to SK Hynix, which already holds a strong position in the HBM market. The market is pricing in those risks, and the stock has responded accordingly: up 63 percent in the past 30 days and 172 percent year-to-date, trading at 1.84 million won — just shy of the record high set in mid-May.

The technical gap between the two rivals is notable. Samsung's yield on HBM4 is below 60 percent; SK Hynix's latest DRAM process already achieves 80 percent. That advantage could narrow if Samsung manages to launch HBM4 mass production in the second half of 2026, potentially trimming SK Hynix's market share from current levels to 50–60 percent. But for now, the wind is at SK Hynix's back.

Analyst Targets Skyrocket as Supply Squeeze Extends

Nomura has doubled its price target on the stock to 4 million won, arguing that SK Hynix is no longer a cyclical memory name but a structural growth story. KB Securities set a target of 3 million won, describing the environment as an “era without supply” because few new production lines are expected before 2027. SK Securities also sees the stock at 3 million won, noting a forward P/E of roughly 5.2 — a valuation that, in their view, traditional cyclical metrics fail to capture.

Goldman Sachs has raised its estimate for the global DRAM supply deficit in 2026 to 4.9 percent, up from 3.3 percent. Market researchers do not expect meaningful price relief until after 2027. That leaves SK Hynix in an enviably tight spot: demand keeps running faster than capacity can be built.

The Road to HBM4E

While current production focuses on HBM4 built on 1b DRAM, management is already plotting the next leap. Samples of the more powerful HBM4E are scheduled to go to customers in the second half of 2026, with mass production targeted for 2027. The core chip will use a finer 1c-nanometer process, tailored to specific client requirements.

For now, SK Hynix is playing a game of catch-up with its own success. The company's aggressive expansion in Yongin, combined with its focus on high-margin server DRAMs and enterprise SSDs, is designed to lock in the production lines needed to convert today's order backlog into tomorrow's revenue. Whether the margin story can hold once Samsung gets its HBM4 act together remains the big question — but for 2026, the script belongs entirely to SK Hynix.