By Yoolim Lee

(Bloomberg) — SK Hynix Inc.’s (000660.KS) shares slid after record quarterly results failed to impress investors grappling with stagnant smartphone demand and questions about AI spending in 2025.

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Nvidia Corp.’s (NVDA) main supplier of high-bandwidth memory reported a more than 20-fold jump in December-quarter operating profit to 8.08 trillion won ($5.6 billion) — eclipsing rival Samsung Electronics Co.’s (005930.KS) earnings for the first time. But the stock slid more than 2% after investors cashed out of a 30% share rally this year.

SK Hynix’s scorching growth underscores the extent of a global boom in datacenter spending, and the company’s place at the forefront of the HBM chips that Nvidia accelerators need to train AI. It may also help assuage concerns that an AI-fueled spending spree by Big Tech companies from Microsoft Corp. (MSFT) to Meta Platforms Inc. (META) has peaked.

This week, SoftBank Group Corp. (9984.T), OpenAI, Oracle Corp. (ORCL) and Abu Dhabi-backed MGX unveiled a $100 billion venture to bankroll and build datacenters. News of the Stargate project, promoted by President Donald Trump, fueled a rally in industry players from Nvidia to Arm Holdings Plc (ARM) as investors anticipated a surge in datacenter construction.

SK Hynix said it expects HBM sales to more than double this year. The South Korean company also boosted its annual dividend by 25% to 1,500 won a share.

“SK Hynix will be a big beneficiary” of Stargate, said Sanjeev Rana, an analyst at CLSA Securities Korea. “They have a significant lead, whether in terms of product quality or production yields...It will take some time for competitors to catch up.”

Well ahead of Samsung and Micron Technology Inc. (MU) in designing and supplying HBM, SK Hynix said it now plans to ship cutting-edge 16-layer HBM4 chips in the second half of 2026. The company, which said capital spending would increase slightly this year, needs to stay ahead of Samsung.

HBM made up 40% of its overall DRAM chip revenue in the quarter. Demand for such high-end memory will continue to increase as investment in AI servers expands and inference — making predictions from data — grows in importance, the company predicted.

And while smartphone demand — even for Apple Inc.’s (AAPL) iPhone — remains muted, the Korean firm expects sales of PCs and devices equipped with AI features to expand, fueling a second-half pickup.

The hope is that AI demand will more than make up for weakness in traditional memory.

SK Group Chairman Chey Tae-won told reporters at CES in Las Vegas that SK Hynix has quickened its pace of development to keep up with Nvidia’s demands. During that trip, he met Nvidia co-founder Jensen Huang to discuss ways to deepen their relationship.

The Korean company is racing to supply customers with its next HBM offering this year. It said last year it’s investing about $15 billion in South Korea to meet surging demand for high-end chips, on top of a plan to spend $3.9 billion on an advanced packaging plant and research center for AI products in Indiana.

Samsung has said it plans to mass-produce HBM4 chips in the second half of 2025, seeking to catch up to its smaller rival with the more advanced products. On Wednesday, Samsung unveiled its latest Galaxy S25 marquee, promising improved AI capabilities.

What Bloomberg Intelligence Says:

SK Hynix’s 1Q sales could decline sequentially, yet grow strongly year-over-year. This follows robust 75% growth in 4Q vs. a year earlier on surging demand for high bandwidth memory (HBM) chips. Operating profit in 1Q might also rise strongly from a year earlier. The average selling price (ASP) for DRAM in 4Q was up about 10% sequentially due to HBM chips, while NAND chips’ ASP was down about 5% sequentially. DRAM-bit shipments in 1Q could decline by about a low-teen percentage sequentially, after 4Q’s rise of about 5%. NAND-bit shipments in 1Q might be down by a high-teens percentage from 4Q, when bit shipments were down about 5% vs. 3Q. Demand for non-AI applications may be seasonally weak in 1Q, which might lead to weak NAND sales.

- Masahiro Wakasugi, analyst

—With assistance from Youkyung Lee.

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