South Korea’s SK Hynix announced on Wednesday that it will return almost $75 billion to shareholders this year.
The company reported a more than seven-fold increase in quarterly profit, driven by the impact of AI infrastructure demand on memory chip pricing.
In contrast to investor concerns about the momentum of AI demand and the sustainability of AI investment, an Nvidia supplier stated that it has sold out of HBM and DRAM chips until 2029, that HBM demand was double what it can supply, and that a chip shortage is likely to continue through 2030.
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Gains in Asian tech equities were fueled by its optimistic forecast. Shares of SK Hynix increased 11%, while Samsung Electronics, a bigger competitor, gained 9%.
Chief Financial Officer Kim Woo-hyun addressed the potential slowdown in clients’ AI spending, stating that investors were examining project viability and profitability more closely but that spending will still go on.
We anticipate that the momentum of AI investment will continue since consumers’ AI expenditure is translating into more widespread adoption of AI services and observable business outcomes, and the variety of businesses engaging in AI is also growing more diverse,” Kim stated.
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The chipmaker revealed that its shareholder return program will total around 100 trillion won ($75 billion) this year.
This will include over 30 trillion won in cash dividends and over 60 trillion won in share repurchases and cancelations, of which 40 trillion won were disclosed in August.
Additionally, it stated that it would pay out a special dividend to shareholders as part of its third-quarter and full-year distributions, returning the majority of the profit from its investment in Japanese peer Kioxia.
According to Ryu Young-ho, senior analyst at NH Investment & Securities, its pledge to repurchase and cancel shares would be a successful strategy to increase the value per share.
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In an AI-driven chip boom this year, SK Hynix shares have more than doubled, although they have fallen by half from a record high reached in June.
Locking in customers
According to Nomura data, SK Hynix leads the world in HBM, the high-bandwidth memory used in AI processors, and holds nearly half of that market. It is also a major supplier of standard DRAM memory.
Competition is building over the longer term, though. China’s CXMT intends to start making HBM3E chips within two months, even though its yields may be as low as 20%.
To get a clearer read on future demand, SK Hynix says it has secured long-term supply deals with 14 large customers. It is also in talks with several of them about stretching those deals beyond their usual five-year length.
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The company added that the volume already locked in covers over half of its planned output for 2027 and 2028.
To keep up with demand, SK Hynix will raise its capital spending substantially next year. The money will go toward equipment for advanced chip manufacturing and toward facilities in South Korea and abroad.
Record quarterly profit
SK Hynix posted an operating profit of 83.3 trillion won for July to September, its highest quarterly profit ever and up from 11.4 trillion won a year earlier.
The figure beat the 76.7 trillion won LSEG Smart Estimate, a forecast that gives more weight to analysts with stronger track records.
Revenue jumped 328% to 104.6 trillion won.
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Ryu said the earnings, which topped expectations, have calmed many of the market’s worries. He added that because the fourth quarter is usually the strongest, operating profit could approach 100 trillion won.
In his view, the company’s clear message about lasting medium- to long-term demand for memory has probably put investors at ease.
