AI Boom Fuel
As forecasts strengthen that the memory semiconductor industry will rebound significantly in the second half of this year, SK hynix’s shares have surged by over 50% since the beginning of the year. The demand for High Bandwidth Memory (HBM) and Double Data Rate 5 (DDR5) is rapidly expanding in the wake of the artificial intelligence (AI) boom, leading to expectations of rapid improvement in the performance of SK hynix, which ranks first in the world in terms of market share in these areas.
According to financial information company FnGuide on June 25, nine domestic securities firms have raised the target price for SK hynix's shares just this month. Living up to expectations, SK hynix's shares reached 121,100 won in intraday trading on the June 15, marking a 52-week high. Compared to the closing price on December 29 last year (75,000 won), the shares have risen by 61.3%. SK hynix's closing price on June 23 was 113,600 won (US$87.26), a 0.35% drop from the previous day, but the drop was smaller than that of the KOSPI index (-0.91%).
Foreign investors' “storm of buying” is boosting SK hynix. Foreign investors purchased a net 191.5 billion won in SK hynix shares just this month. This contrasts with a net sale of shares worth 462.7 billion won in the entire Korea Exchange over the same period. This reflects the expectation that the semiconductor market will rebound significantly from the third quarter due to the production cuts decided by the big three in memory semiconductors (Samsung Electronics, SK hynix, Micron). According to Taiwanese market research firm TrendForce, this year’s global DRAM demand is expected to exceed supply, with an annual demand of 1.05419 trillion units on a 2 gigabit chip conversion basis, surpassing supply (1.04362 trillion units).
The rapidly increasing demand for DDR5 and HBM, which are essential for AI operation, is expected to offset the price decline of DDR4, according to securities firms. Kim Kwang-jin, a researcher at Hanwha Investment & Securities, estimated that “the proportion of DDR5 within server DRAM has increased from 10% in the first quarter to over 30% in the second quarter,” and projected that “DRAM shipments will increase by about 35% compared to the previous quarter.”
SK hynix also leads the market in HBM, overtaking Samsung Electronics. It is also the only company producing 128-gigabyte DDR5 in mass quantity. This is why SK hynix is touted as the biggest beneficiary of the AI boom.