SK Hynix (SKHY.US), set to release its first earnings report since its Nasdaq listing after the U.S. market close on July 28, is drawing investor focus on how its stock price will react post-results. Wall Street consensus expects the company’s Q2 revenue to reach 84.12 trillion Korean won (approximately $57.6 billion), with GAAP earnings per share (EPS) of 80,145.08 won and Non-GAAP EPS of 70,975.39 won, translating to a GAAP EPS of about $4.87.
The AI-driven memory upcycle continues to unfold, positioning SK Hynix, a leader in high-bandwidth memory (HBM), for one of its most profitable quarters ever. However, after a rapid rally, the stock has seen a sharp correction, falling over 30% in the past month, with the market closely watching whether this earnings report can restore confidence.
Sharp Reversal Hits Before ‘One of the Most Profitable Quarters’
On Tuesday, South Korean semiconductor stocks plunged, extending the weakness in the U.S. chip sector overnight and intensifying a sector-wide selloff.
Samsung Electronics and SK Hynix, both leading suppliers of HBM chips widely used in AI servers, are highly sensitive to changes in capital expenditure expectations of U.S. hyperscalers, making them prone to sharp volatility at any hint of trouble.
SK Hynix’s intraday losses widened to over 10%, while Samsung Electronics fell more than 8%. Other AI-related stocks also came under pressure, with Samsung SDI dropping over 7%, LG Innotek plunging nearly 14%, Seoul Semiconductor down about 6%, and LG Chem falling over 4%.
Japan’s semiconductor sector was not spared either. Tokyo Electron tumbled over 9%, Advantest slid more than 8%, and SoftBank Group, a key AI bellwether through its stake in Arm, fell nearly 5%. Computer memory chip maker Kioxia plunged over 15%.
The selloff was triggered by the weak performance of U.S. semiconductor stocks on Monday. The VanEck Semiconductor ETF (SMH) fell over 2% that day, extending Friday’s decline, with AMD and Teradyne leading losses at 5% and 4%, respectively, while Micron Technology dropped about 2%.
This weak performance highlights the increasingly tight correlation between Asian tech stocks and the U.S. AI trade narrative.
From the options market, pricing for at-the-money straddles expiring this Friday suggests traders expect a one-directional stock price move of about 10.9% post-earnings. Based on the current stock price of $139.90, the implied post-earnings trading range is roughly between $125.60 and $155.14.
Options open interest for the week ending July 31 shows a distinctly bearish tilt. Among near-term strike prices, the put option at $120 has the highest open interest at 16,704 contracts, marking a key downside reference point. For call options, the $170 strike has the highest open interest at 4,516 contracts. Overall sentiment leans heavily toward downside protection, with total put open interest at 108,579 contracts versus calls at just 19,324, resulting in a put/call open interest ratio of 5.62, far above the equilibrium level of 1.0.
Looking at longer-term positions, traders have built up significant positions in deep out-of-the-money options. The $200 call option has the highest open interest among all calls at 53,031 contracts, suggesting some investors are positioning for a substantial rally over a longer timeframe. Downside hedging is concentrated in the $85 put option, which leads all puts with 65,470 contracts.
Q2 Preview: AI Memory Supercycle at a Key Verification Point, Profits Could Hit Record Highs
SK Hynix will release its Q2 2026 earnings on July 29. According to consensus from 14 brokerages compiled by Yonhap Infomax, a South Korean financial information provider, the company’s Q2 revenue is expected to be about 84.1 trillion won (approximately $57.6 billion), with operating profit projected at 64.1 trillion won, both setting new historical records. If results meet expectations, the operating profit from Q2 alone would surpass the company’s full-year 2025 total of 47.2 trillion won.
HBM Remains Growth Core, AI Client Contributions Rise
Market consensus points to AI infrastructure investment as the core driver of this earnings growth. Continued improvement in traditional DRAM prices, coupled with strong demand for HBM and enterprise SSDs, are key profit growth drivers. As global cloud service providers expand AI data centers and boost purchases of high-performance memory products, SK Hynix’s product mix is steadily shifting toward higher-margin AI memory.
South Korean brokerage KB Securities expects revenue from global tech giants and AI data center operators to account for about 70% of SK Hynix’s total sales in Q2, a significant increase from previous years. Analysts believe that as more HBM capacity comes online, new supply of traditional DRAM will be somewhat constrained. Meanwhile, a rising share of long-term supply agreements (LTAs) provides greater revenue predictability for the company.
Compared to its past reliance on consumer electronics market volatility, SK Hynix is now increasingly dependent on large enterprise clients and AI infrastructure orders, leading to a structural improvement in earnings stability. The industry expects that by around 2027, the company’s B2B revenue share could rise to about 70%, far above levels seen in the previous memory cycle. This suggests that the growth logic of the current AI-driven cycle differs significantly from past traditional memory cycles.
Profitability Continues to Improve, Cash Flow Advantage Expands
According to market consensus, the company’s Q2 operating profit margin is expected to reach 75% to 77%, higher than Q1 levels and continuing to lead most global semiconductor firms. If realized, this means that for every 100 won in product sales, about 75 won would translate into operating profit—an extremely rare figure in the manufacturing sector.
Meanwhile, the company’s financial position continues to improve. Since returning to a net cash position last year, SK Hynix’s cash reserves have grown steadily. As of the end of Q1, the company’s net cash balance stood at about 35 trillion won. The market expects this to expand further in Q2, providing more ample funding for subsequent capital expenditures, HBM capacity expansion, and next-generation product development.
With profits continuing to grow, employee performance bonuses are also expected to remain high. According to South Korean media reports, SK Hynix plans to distribute first-half productivity incentive (PI) bonuses before the end of July, likely at the maximum level allowed under the system.
ADR Premium Exceeds 50% Sparks Market Concerns, LTA Model Hides Risks
Despite record-high earnings forecasts, market sentiment is not universally optimistic. SK Hynix’s stock price has recently pulled back significantly from its highs, with its American Depositary Receipts (ADRs) once trading at a premium of up to 51% over its Korean-listed common shares, prompting Wall Street warnings about overheating in AI trades.
Typically, if a company’s shares listed in different markets show a significant price gap, arbitrage capital tends to push prices toward convergence. However, SK Hynix’s ADRs have maintained a high premium for an extended period, reflecting U.S. investors’ willingness to pay a valuation premium for the AI memory leader. But with market expectations already elevated, if earnings or management guidance fail to meet investor expectations, the high valuation could amplify stock price volatility.
Additionally, there are concerns about the sustainability of the long-term supply agreement (LTA) model in the memory industry. In its latest annual economic report, the Bank for International Settlements (BIS) warned that temporary shortages in the AI supply chain are amplifying the risk of overinvestment, and companies locking in future capacity through long-term contracts could face greater risk exposure if demand reverses. Similar views have become a key reason for some investors’ recent concerns about AI supply chain valuations. The U.S. memory and semiconductor sector has already seen a notable correction, as the market begins to reassess the sustainability of AI infrastructure investment and whether data center construction pace could slow in the coming years.
However, optimistic institutions still believe that the current supply-demand landscape has not changed significantly. Morgan Stanley analyst Joseph Moore recently noted that after discussions with several data center procurement managers, HBM and high-end memory products remain in short supply, and he expects memory prices to rise at least another 25% in Q3. He believes the recent pullback in memory stocks reflects market sentiment rather than fundamental deterioration, and industry supply tightness could persist until 2028.
Therefore, SK Hynix’s earnings report this week will not only verify Q2’s record results but, more importantly, provide management’s latest assessment of HBM demand, long-term orders, capital expenditures, and the industry outlook for the second half of the year. This information will not only influence SK Hynix’s subsequent stock performance but could also serve as a key barometer for whether the global AI memory supercycle is still intact.
