SK Hynix profit disappoints as spending soars to US$31 billion

The logo of SK hynix is seen on the company's factory building in Icheon on July 29, 2026. Photo by Jung Yeon-je / AFP via Getty Images

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SK Hynix Inc. earmarked at least US$31 billion in capital spending this year after reporting a six-fold surge in quarterly profit, a record outlay that coincides with growing fears about overinvestment in AI capacity.

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SK Hynix said it expects its capital investments to rise around 50 per cent to at least 45 trillion won (US$31 billion). It posted margins of more than 80 per cent for the June quarter — a high watermark — because of the endemic memory shortages that have helped raise prices it charges customers like Apple Inc. and Nintendo Co.

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Yet the Korean company’s shares fell 19 per cent in Seoul Wednesday, reflecting both the sky-high expectations that surround the AI industry’s linchpins and the growing concerns that big tech firms such as Meta Platforms Inc. are building more data centers than they need. Korea’s benchmark KOSPI fell for a second straight day.

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SK Hynix executives brushed aside those fears on Wednesday, telling investors they’re signing long-term contracts with no end in sight to explosive demand. They echoed SK Group Chairman Chey Tae-won’s view that demand will outpace supply till at least 2030. It’s now preparing to deliver the next-generation of high-bandwidth memory, known as HBM4E — in bulk to top customer Nvidia Corp. in 2027. And bit growth, or unit shipments of memory capacity, should accelerate in the second half, executives said.

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“Investor expectations might have gotten a bit excessive,” said Jason Lemire, chief investment officer at Bold Wealth Partners. “The results need to be put into perspective, though. These are amazing numbers. The company is firing on all cylinders, and faces so much demand pressure that it decided to radically increase its capex numbers.”

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Despite consistently strong numbers, SK Hynix’s shares have headed south since June after doubts grew about whether global AI spending will justify the chip sector’s lofty valuations. Tech companies’ rising debt levels are also weighing on investors’ minds. The growing amounts of leverage tied to players like SK Hynix in particular has also turbo-charged volatility across Korea’s bourse, wiping out roughly 45 per cent of the company’s value in about a month.

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Investors worry that soaring chip costs may trigger a broader economic slowdown, pushing prices of electronics higher and spurring manufacturers to cut production of devices like PCs and smartphones. Brokerages including Mirae Asset Securities Co. have trimmed their second-quarter profit estimates for SK Hynix in recent weeks, citing moderated growth in average selling prices of chips.

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Chipmakers have pushed back, saying that demand is expected to outstrip supply for the long term. They point to customers such as cloud service providers ratcheting up orders for memory, lifting both volumes and margins. SK Hynix chief executive Kwak Noh-Jung told Bloomberg earlier this month that the severe memory chip shortages that are roiling the computer, car and device makers would likely persist beyond 2030.