Why SK Hynix Stock Just Hit a Record — And Why Pension Funds Are Selling Anyway

One type of stock chart causes you to pause and take another look. Currently, SK Hynix’s chart is one of those. The 52-week range, which ranges from 176,700 won at the bottom to 1,328,000 won at the top, appears more like a misprint than a typical trading range. It’s real, though. The share price of the Korean memory manufacturer, which has its headquarters in a sleepy city southeast of Seoul, reflects nearly every sentiment the market has had about AI over the past 12 months. The company has emerged as the unlikely protagonist of this year’s AI hardware story.

The most recent change occurred on Monday, when Intel’s earnings sent shockwaves through Asian semiconductor stocks, causing shares to soar more than 7% to a record high. Due to the possibility of a unionized worker strike in May, Samsung Electronics also increased, but only by roughly 2.5%. There was no such drag at SK Hynix. The stock has nearly doubled since January and increased by roughly 60% in April alone. This is the kind of vertical run that typically raises questions. However, broker after broker continues to raise the target price. The current value of Nomura is 2.34 million won. Korea Investment & Securities, Daol, KB, and Mirae Asset have all gathered near the two million won threshold. Listening to the analyst calls gives the impression that no one truly wants to be in charge.

The explanation is fairly straightforward. The market for high-bandwidth memory (HBM), which is stacked next to Nvidia’s accelerators in the data centers currently being constructed in Texas, Virginia, Singapore, and Saudi Arabia, is dominated by SK Hynix. The company’s HBM sales manager, Ki Tae Kim, recently told Reuters that customer demand for the next three years already surpasses SK Hynix’s capacity. From the opposite perspective, memory pricing conveys the same message.

In the first quarter, contract DRAM prices increased by almost 83%, while some NAND categories saw a 160% increase. The financials reflect the kind of pricing power that Korean chipmakers haven’t experienced in nearly ten years. The operating margin reached about 72 percent, Q1 revenue increased by 198 percent year over year, and the combined Samsung-Hynix operating profit this year is estimated to be close to 545 trillion won, a fivefold increase over the previous year.

The fact that different types of investors behave differently is what makes this moment truly peculiar. In late April, Korean pension funds began rebalancing after witnessing the stock soar higher. They purchased roughly 99 billion won of SK Square, the holding company that owns roughly 20% of Hynix, and sold about 157 billion won of SK Hynix over the course of ten trading days. The “single-stock 10 percent rule” in Korea restricts how concentrated institutional portfolios can get, which is the technical explanation, but it’s more difficult to ignore the emotional read. Chips are being taken off the table even by those closest to the rally. Samsung and SK Hynix accounted for about 62% of the 14.8 trillion won that retail investors dumped on the main exchange this month.

Anyone watching this unfold is aware of the larger context. The question of whether HBM will finally end the cycle of booms and busts that have plagued the chip industry for the past 20 years is currently being discussed in Seoul brokerages. The manufacturers of memory chips are publicly hoping that the AI craze will put an end to the boom-and-bust cycle that has plagued them since the 1990s. It is feasible. It’s also possible that the same operating leverage that increased margins to 72 percent unwinds in the opposite direction as AI capital expenditures normalize more quickly than supply tightness. The macro picture is further hampered by the Iran War, oil prices rising by 3%, and a split US Federal Reserve.

It’s difficult to watch this without experiencing some anxiety in addition to excitement. The company’s primary fabrication facilities are located in Icheon, which has been here before, albeit in different forms and during different cycles. The Korean chip industry is well aware of how quickly euphoria can turn sour. However, the stock continues to print new highs, the order book is full, and customers are in line. The upcoming quarters will likely reveal whether the next leg results from sentiment cooling or from operating reality. At the very least, the supply tightness appears genuine. The remainder is just the market acting as it always does.