SK Hynix Surges 15% to New High: HBM Shortage Until 2028, How Much Longer Can AI Memory King Rise?

In the first quarter of 2026, SK Hynix reported revenue of 52.58 trillion won, up 198% year-over-year; operating profit reached 37.61 trillion won, a 405% year-over-year increase, with an operating margin of 72%, surpassing NVIDIA's ( NVDA) 65%, setting a new record for the semiconductor manufacturing industry.

In April, Goldman Sachs raised its 2026 DRAM supply-demand gap forecast from 3.3% to 4.9%, calling it the most severe shortage in 15 years. The top three memory manufacturers have essentially fully booked their capacity for this year, and with wafer fab construction taking four to five years, there will be almost no new capacity added this year. SK Hynix also stated publicly that DRAM, NAND, and HBM are completely sold out, making it impossible to satisfy all customer orders.

The demand side is equally robust. According to statistics from several media outlets based on the latest financial reports, the 'Big Four' tech giants, including Microsoft ( MSFT ), Meta ( META ), and others are expected to see cloud computing capital expenditures exceed $725 billion in 2026, up approximately 40% year-over-year. SK Group Chairman Chey Tae-won even warned that the wafer shortage could last until 2030. Goldman Sachs' assessment is slightly more conservative, stating that memory chips will remain in a state of undersupply until at least the first half of 2027.

In early May 2026, media reported that Microsoft, Google ( GOOGL ), and Amazon ( AMZN) are among the companies planning to propose investment plans to SK Hynix, offering to fund capacity expansion to secure HBM capacity allocations for the coming years in advance.

SK Hynix currently holds about 70% of Nvidia's HBM orders. Its Cheongju M15X plant is set to begin production within the year, and the first phase of the Yongin cluster is scheduled for completion by the end of 2027, providing capacity support for HBM4 and HBM5.

However, Samsung Electronics is accelerating its pursuit. According to an early May report from SBS Biz, Samsung has passed the final quality tests for HBM4 from Nvidia and AMD, with full-scale supply expected to begin in June. Notably, Samsung has raised its foundry price for 4nm HBM4 logic dies by 40% to 50%, signaling substantial technological progress.

Although Samsung's overall HBM4 yield remains below 60%, trailing SK Hynix's 1c DRAM yield which has already improved to 80%, Samsung has secured qualification for Nvidia's Vera Rubin platform.

Should Samsung achieve mass production of HBM4 in the second half of 2026, SK Hynix's market share could slide to 50%-60%, exposing it to the risk of a valuation re-rating. Micron ( MU) while it has showcased its HBM4 36GB product, its mass production schedule lags behind competitors by one to two quarters, making its short-term threat relatively limited.

Whether Samsung's HBM4 can enter Nvidia's supply chain will be largely settled by the fourth quarter of 2026. If Samsung achieves mass production as scheduled, the market will lower its expectations for SK Hynix; conversely, if Samsung faces delays, SK Hynix's valuation premium could expand further.

Looking further ahead, SK Hynix's new capacity in Cheongju and Yongin will be released in volume by mid-2027. According to Gartner's forecast, global AI server spending is expected to grow by about 49% in 2026, but the growth rate will gradually subside thereafter. By then, the supply-demand gap will narrow significantly, and HBM unit prices may face pressure.

UBS raised its target price from 1.55 million KRW to 1.7 million KRW on May 11, while upgrading its EPS forecasts for 2026 and 2027 by 22% and 29%, respectively, citing a memory super-cycle unseen in nearly 30 years.

UBS suggests that this cycle differs from previous ones, as its duration and profitability heights have already exceeded the framework of traditional cycles.

South Korea's SK Securities issued a street-high target price of 3 million KRW on May 7, representing over 50% upside from current levels; the firm argues that SK Hynix's 12-month forward P/E is only about 5.2x and should not be valued by traditional cyclical industry standards, as the AI era requires a new earnings framework.

BOCOM International remains relatively conservative, maintaining a "Buy" rating with a target price of 1.65 million KRW, still pricing the stock based on traditional cyclical logic.

With the current share price at approximately 1.94 million KRW, the stock sits in the middle of the target range of 1.65 million to 3 million KRW. The market generally agrees that the HBM supply-demand imbalance will persist at least until 2028; the true divergence lies in whether to apply the low P/E standards of traditional cyclical stocks or the new valuation logic of AI growth stocks.

SK Hynix currently has a market capitalization of approximately $900 billion. Based on an annualized first-quarter operating profit of $26.7 billion, its P/E ratio is roughly 8.4x. If calculated using the 2026 full-year operating profit of $140 billion to $150 billion projected by multiple brokerages, the forward P/E ratio is approximately 6.5x, placing it at the midpoint of the cycle rather than at an extreme.

Applying the valuation logic of the AI industry chain, the upper limit for a reasonable P/E ratio would be between 10 and 15 times, corresponding to a market capitalization of approximately $1.05 trillion, which translates to a target price of roughly 2.2 million KRW.

The 3 million KRW target price set by SK Securities is predicated on the assumption that Samsung cannot effectively challenge SK Hynix's market share; given Samsung's current HBM4 yields and mass production timeline, the probability of this scenario is low.

Therefore, judging solely by current valuation levels, SK Hynix's share price does not yet exhibit bubble-like characteristics, though the potential for further significant gains is relatively limited. Upward momentum will primarily depend on the subsequent expansion of the supply-demand gap exceeding expectations.

Over the next three to four months, the HBM supply gap is expected to continue widening, as Samsung's mass production has yet to pose a material impact on SK Hynix's order book. Given current valuation levels and Samsung’s progress, there is a high probability the stock price will further challenge the 2.2 million won level.

The fourth quarter of 2026 will serve as a decisive inflection point, requiring an adjustment of expectations based on Samsung’s actual market share at that time. While SK Hynix’s super-cycle remains intact, the critical variable for the second half is whether the company can maintain its competitive edge against catch-up players.

For long-term investors capable of weathering short-term valuation volatility, the long-term allocation value of SK Hynix remains clear, given that HBM is an essential hardware component for AI computing power.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.