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Top AI Memory Maker SK Hynix Poised for Further Growth
SK Hynix's stock has surged 95% since last year, outperforming competitors Samsung and Micron. The company’s early entry into the high-bandwidth memory (HBM) market has attracted investor attention. Its focus on HBM has helped SK Hynix report an operating profit after four consecutive quarterly losses.
Investors are optimistic about the potential for continued gains in the shares of SK Hynix Inc., the leading memory supplier for Nvidia Corp., despite a significant surge in stock price.
The South Korean company has seen its stock rise by an impressive 95% since the beginning of last year, outperforming competitors Samsung Electronics Co. and Micron Technology Inc. However, SK Hynix is still trading at a relatively low valuation compared to its peers, making it an attractive investment opportunity.
With a forward earnings estimate of just 11 times, SK Hynix is trading cheaper than Samsung (15 times), Micron (30 times), and the Philadelphia Semiconductor Index (27 times). This valuation discrepancy has caught the attention of investors who believe that the company's stock has the potential for further upside.
One of the key factors driving investor interest in SK Hynix is its early entry into the high-bandwidth memory (HBM) market. HBM is crucial for supplying large volumes of data at high speeds, making it essential for artificial intelligence (AI) applications. SK Hynix's dominance in this market has positioned it as a strong contender in the AI industry, gaining attention after years of playing second fiddle to Samsung.
Yoon Joonwon, a fund manager at DS Asset Management Co., emphasizes the importance of including SK Hynix in investment portfolios, stating, "It's too risky not to own SK Hynix in the portfolio. As global big tech firms are seeing further gains, investors are expecting more upside in SK Hynix too."
Unlike traditional memory, HBM chips are not subject to cyclical demand and pricing fluctuations. This makes them more lucrative, especially with the increasing demand for AI products. SK Hynix's focus on HBM has paid off, as the company reported an operating profit for the last quarter of 2023, following four consecutive quarterly losses.
To maintain its lead in the AI market, SK Hynix has reportedly partnered with Taiwan Semiconductor Manufacturing Co. (TSMC) to develop its next-generation HBM chip. This collaboration has sparked market speculation about SK Hynix's potential as a clear winner in the HBM space, further driving demand for its products.
Analysts are bullish on SK Hynix, with 40 of them giving the stock a buy-equivalent rating. The average sell-side price target suggests an expected return of 20% over the next 12 months. Options traders are also optimistic, with an increase in average daily call volume compared to last year.
Upcoming catalysts, such as Nvidia's earnings report on February 21, will provide more insights into the outlook for AI and could impact SK Hynix's stock performance. Additionally, investors will be keeping an eye out for any news of partnerships or progress by competitors, as this could indicate a potential shift in leadership within the AI industry.
In conclusion, SK Hynix's impressive performance, coupled with its dominance in the HBM market, has positioned the company for further growth. Investors remain bullish on the stock, expecting continued upside potential. With its attractive valuation and strong market position, SK Hynix is poised to capture a significant market share in the DRAM industry.
SK Hynix's stock has surged 95% since last year, outperforming competitors Samsung and Micron.
The company’s early entry into the high-bandwidth memory (HBM) market has attracted investor attention.
Its focus on HBM has helped SK Hynix report an operating profit after four consecutive quarterly losses.
Source: Bloomberg