Key Takeaways
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SK hynix (SKHY)fell 33% in the month through October 22, compared with a 22% decline for Micron (MU)and a 6% drop in the Nasdaq 100.
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Lam Research (LRCX)added pressure to semiconductor stocks as investors questioned whether AI infrastructure spending could sustain its rapid growth.
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SK hynix reported record Q3 revenue of KRW 104.6 trillion, up 328% year over year, with an 80% operating margin.
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Strong HBM demand, long-term customer agreements, and approximately KRW 100 trillion in planned shareholder returns strengthen the case for buying rather than selling.
What Happened?
SK hynix ( SKHY:NASDAQ )stock plunged 33% in the month through October 22, closing at $132 as concerns about Chinese memory competition and AI infrastructure spending weighed on semiconductor stocks.
The decline significantly exceeded the broader market's losses. Micron ( MU:NASDAQ )fell 22% over the same period, while the Nasdaq 100 declined 6%, highlighting the pressure on memory stocks.
On October 13, China's CXMT reportedly made progress developing denser DRAM technology, raising concerns that expanding Chinese production could eventually pressure memory prices. The company's technological claims have not been independently verified.
Meanwhile, Lam Research ( LRCX:NASDAQ )reported September-quarter revenue of $8.22 billion and projected approximately $8.6 billion for the December quarter. Although its outlook indicated continued growth, investors questioned whether semiconductor equipment spending could maintain its recent momentum.
Together, these developments fueled concerns about the sustainability of the memory industry's extraordinary profitability.
However, SK hynix's October 28 earnings challenged the bearish narrative. Shares rebounded following the announcement but closed October 30 at $149, remaining 24% below their September 22 closing price.
Record Earnings Strengthen the Bull Case
SK hynix reported record third-quarter revenue of KRW 104.6 trillion, up 328% year over year and 32% from the previous quarter.
Operating profit reached KRW 83.3 trillion, up 632% year over year, while operating margin climbed to 80% from 76% in the second quarter.
Growth was supported by strong demand for high-bandwidth memory (HBM), advanced server DRAM, and enterprise storage products benefiting from AI infrastructure investment.
Management also confirmed long-term agreements with 14 major customers, covering more than half of expected production capacity for 2027 and 2028.
CEO Kwak Noh-Jung said customer trust built through the company's technological competitiveness is "leading to long-term contracts," providing greater visibility into future demand.
Wall Street expects SK hynix's revenue to increase significantly through 2028 before declining modestly in 2029, according to TIKR consensus estimates. The projected growth reflects continued demand for AI-related memory products, although the expected decline in 2029 highlights the industry's cyclical risks.
Chinese competition remains a legitimate concern, particularly in conventional DRAM and NAND flash. However, HBM's technical complexity and SK hynix's established customer relationships make its advanced memory business more difficult to disrupt.
Is SK hynix Undervalued or Overvalued?
SK hynix appears potentially undervalued relative to its earnings strength, although the post-earnings recovery has reduced the discount seen during October's selloff.
Its forward P/E approached 3x during the decline, below its approximately 4x historical average since its US listing. By October 30, the multiple had recovered to approximately 4x, making future earnings growth increasingly important to the valuation.
The company also announced approximately KRW 100 trillion in planned shareholder returns for 2026, including cash dividends and share repurchases, strengthening the investment case despite the discontinued Solidigm IPO.
Over the next 12 months, growing HBM4 shipments, enterprise memory demand, and long-term customer agreements could support earnings, although Chinese competition, higher capital spending, and a potential memory-price downturn remain important risks.
The verdict favors buying rather than selling: SK hynix's record profitability and stronger demand visibility suggest October's selloff overstated the immediate risks, although the stock's partial recovery makes valuation discipline more important.
So what is SK hynix stock actually worth?
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