South Korean chipmaker SK hynix said on Wednesday that its third quarter operating profit rose by 632 percent compared to a year ago. The company said strong demand from the artificial intelligence industry for its memory chips drove the jump.
Operating profit for July to September reached 83.33 trillion won, or about $62.8 billion, the company said. Sales for the quarter came to 104.61 trillion won.
“SK hynix analysed that a virtuous cycle has taken hold in which AI-driven productivity gains and new revenue generation in areas such as software development, customer service, and search lead to greater AI adoption,” the chipmaker said in a statement.
Net profit for the quarter rose 215.7 percent from last year to 39.77 trillion won. The company said it has now posted record revenue and operating profit for six quarters in a row.
The results still fell short of what the market expected. Analysts had expected net profit of 59.67 trillion won on average, according to South Korea’s Yonhap news agency.
SK hynix supplies high-bandwidth memory chips to the US company Nvidia. It is also one of the main companies in South Korea’s tech-led economy.
The global race to build AI data centres has changed the company’s fortunes. This is despite concerns that the AI sector may be overvalued.
Chips known as DRAM and storage parts called NAND are in high demand. They are used in everyday gadgets. They are also needed to process the huge amounts of data used by generative AI.
Analysts said a global shortage pushed DRAM prices higher. Stronger sales of high-margin HBM chips also lifted earnings. The AI boom raised prices and shipments of ordinary NAND chips too.
MS Hwang, an analyst at research firm Counterpoint, told AFP that long-term deals with big customers such as Nvidia point to more price increases. “This indicates that quarterly earnings have not yet reached their peak and that the upward trajectory will likely sustain at least through 2027,” Hwang said.
Hwang also warned of risks. “Weaker AI spending, increased competition, and the company’s own capacity expansion are all factors that dictate price volatility,” he said. He added that the worst case would be a repeat of 2018, when cloud service providers all cut their orders at the same time.
The company’s shares have been under pressure since June. Investors largely ignored the record earnings, which had already been priced in.
Kim Dae-jong, a business professor at Sejong University, told AFP that the stock has fallen nearly 60 percent from its June peak. “I think that is the main reason the company needs to focus on winning back shareholders,” he said.
“The concern is that the extraordinary level of earnings the company is generating today may not be sustainable one or two years from now,” Kim said.
Record profits have led investors to call for more cash through dividends or share buybacks. On Wednesday, SK hynix announced a new plan to return 60 trillion won to shareholders. This follows the completion of an earlier 40 trillion won shareholder return programme.
Source: this article is based on reporting by IOL Technology. Image: IOL Technology. Written with the help of AI and published by the Tzaneen Voice Technology desk. See our Editorial Standards.
Werner Jacobs covers technology for Tzaneen Voice. Werner reports on mobile networks, data prices, internet access, smartphones, apps, AI, cybersecurity and South African tech companies. Each story explains what a new product, price change or policy means for ordinary users in South Africa.