- Shares of SK Hynix have jumped about 250 per cent this year as demand for AI chips continues to rise.
- The company is benefiting from a sharp rise in orders for high-end memory chips used in AI data centres.
- The stock has also seen a massive rise of more than 900 percent in the last yea
Shares of the South Korean chipmaker SK Hynix have jumped about 250 per cent this year as demand for artificial intelligence (AI) chips continues to rise.
The company is benefiting from a sharp rise in orders for high-end memory chips used in AI data centres. Because of this rally, the company's market value has crossed the $1 trillion mark for the first time. The stock has also seen a massive rise of more than 900 percent in the last year.
Analyst Peter Kim from KB Securities said that even after this big rise, the company's fundamentals and valuations still look solid. He explains that when stock prices go up, valuations become expensive. But in this case, the opposite is happening.
"In fact, it's amazing that the valuation is getting cheaper because the race rate of earnings upgrades by analysts is actually surpassing the share price," he added.
Kim also compared global memory chip companies and said that US-based Micron Technology is trading at around 12 times its earnings. On the other hand, SK Hynix and Samsung are trading at a much lower level of about 6 to 7 times earnings. So, Korean chip stocks still look cheaper than their US-based counterparts when it comes to profits.
Meanwhile, analyst Dan Ives from Wedbush Securities said the AI boom is still in an early stage. He described it as being only in the “third inning of a nine-inning game,” and most of the growth is yet to come.
Ives said that SK Hynix is one of the biggest winners of this AI-driven memory supercycle. He added that demand for chips is currently much higher than supply.
Big cloud companies are spending heavily to build AI systems and data centers and because of this, total spending by large tech companies on AI infrastructure is expected to reach around $725 billion, he said.
Philip Wool from Rayliant Global Advisors said that AI excitement is no longer limited to US companies. It has now spread to emerging markets like South Korea and Taiwan.
However, some investors are becoming worried about risk in the South Korean stock market as Samsung Electronics and SK Hynix together make up more than 40 percent of the main stock index. So, the market is heavily dependent on just a few big companies. And if something goes wrong, like supply chain issues or a slowdown in AI data centre spending, the whole market could be affected.
