(Bloomberg) — SK Hynix Inc. (SKHY) quarterly profit rose 557% below expectations, raising fears that the AI boom that has propelled the semiconductor industry may be slowing.
Most read from Bloomberg
Major supplier Nvidia Corp (NVDA) reported operating profit of 60.5 trillion won ($42 billion) in the June quarter, compared with analysts’ average estimate of 64.2 trillion won. Revenue came in at 79.3 trillion won, while the average estimate was 83.9 trillion won.
This happened because the company won multiyear contracts with about 10 customers, it said. Net income from one-time investment gains increased by 1,242% more than expected.
SK Hynix, which overtook Samsung Electronics Co to take the lead in the red-hot AI memory sector, has shed more than $500 billion in value since June as doubts grew about whether the spending would justify a higher valuation. The increasing debt level of tech companies is also affecting the minds of investors. The increasing amount of leverage associated with players like SK Hynix turbo-charged volatility in Korea’s stock market, wiping out about 45% of the company’s value in about a month.
Click here for the liveblog covering SK Hynix’s results.
“When you are the major supplier of high-bandwidth memory powering Nvidia’s chips, the AI boom flows directly to your bottom line,” said Josh Gilbert, eToro’s lead analyst for APAC and the Middle East. “This means the market is unlikely to focus solely on the headline numbers. The bigger question is whether margins and guidance can justify its recent performance.”
Investors worry that rising chip costs could lead to a broader economic recession, driving up electronics prices and prompting manufacturers to cut production of devices like PCs and smartphones. Brokerages including Mirae Asset Securities Co. have cut their second-quarter profit estimates for SK Hynix in recent weeks, citing moderate growth in the average selling prices of chips.
Chipmakers have pushed back, saying demand is expected to outpace supply in the long term. They point to customers such as cloud service providers who are increasing orders for memory, increasing both volumes and margins. SK Hynix Chief Executive Officer Kwak Noh-jung told Bloomberg earlier this month that the severe memory chip shortage that is plaguing computer, car and device makers will likely persist beyond 2030.