Is SK Hynix Stock a Buy After Its Latest Earnings Report?

The South Korean memory chipmaker SK Hynix (NASDAQ:SKHY) has been one of the hottest stocks in the market this year.

The company’s South Korean shares are up roughly 115% this year, and that’s after a nearly 47% pullback over the past month.

Recently, the company delivered strong second-quarter earnings results. SK Hynix reported $42 billion of operating income and roughly $54.4 billion in revenue, which is 257% higher year over year.

However, the results fell short of Wall Street expectations, and shares continued to struggle.

SK Hynix also said it plans to raise capital expenditures to roughly $27.6 billion this year, a roughly 33% increase from 2025. The company is also planning to introduce a capital return policy for shareholders later this year.

Earlier this month, SK Hynix listed American Depositary Receipts on the Nasdaq. Is the stock a buy after its latest earnings report?

Memory stocks have broken out, but ran too far, too fast

SK Hynix is one of the largest manufacturers of memory in the world, specifically, NAND flash memory, dynamic random-access memory (DRAM), and high-bandwidth memory (HBM).

Memory has become imperative in the artificial intelligence trade because it feeds data to the graphics processing units (GPUs) that train large language models (LLMs).

NAND flash memory is a cheaper long-term storage option that can store key data sets even when an operating system’s power is turned off.

DRAM is a more expensive, high-speed, temporary memory source that feeds data to GPUs instantly and is part of why LLMs can respond so quickly to queries. HBM is DRAM dies stacked vertically, providing an even higher-speed memory.

As demand for AI has soared and GPU clusters and data centers have scaled, memory has been in high demand, driving up prices.

SK Hynix has been a huge beneficiary, particularly as analysts expect memory to be constrained for at least the next few years.

Interestingly, on its second-quarter earnings call, management said it has completed long-term supply agreements with 10 customers, which is a new trend for memory makers that also gives Wall Street more visibility into future revenue.

Memory companies are typically viewed as cyclical because there is often a demand-and-supply imbalance. By the time companies catch up, that imbalance often shifts more towards a supply glut.

The current AI supercycle has some investors thinking memory may not be so cyclical this time around.

Is the stock a buy?

Unfortunately, there is no perfect answer to this question right now because a bet on SK Hynix is a long-term bet on AI, and the future of AI is murky.

That said, for a company that has seen its financials soar and is locking in longer-term contracts, SK Hynix’s South Korean shares trade at an undemanding five times forward earnings, according to Yahoo! Finance.

The stock has also pulled back significantly over the past month, so given the fundamentals, I do see this as good a time as any to purchase the stock, particularly if you are a long-term believer in AI.

More conservative investors should consider dollar-cost averaging into the stock now to help smooth out their cost basis over time. Shares are likely to be volatile in the near term.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.