Nvidia supplier SK Hynix to boost spending on AI chips, after record Q2

By Heekyong Yang and Joyce Lee

SEOUL, July 24 (Reuters) - SK Hynix 000660.KS flagged plans to lift spending this year on advanced chipmaking after posting a record quarterly profit on Thursday, boosted by strong demand for artificial intelligence chips and customers stockpiling ahead of potential U.S. tariffs.

The South Korean chipmaker, a key supplier to AI giant Nvidia NVDA.O, said high-end AI chip demand growth would be driven by new model launches by customers and that it was on track to double high-bandwidth memory (HBM) chip sales for the full year.

"CAPEX is expected to increase compared to our previous plans, with most of the investment going toward equipment for HBM product," SK Hynix CFO Kim Woo-hyun told an earnings conference call, without quantifying the numbers or giving a geographical breakdown.

The company said it sees a need for preemptive investments, having secured visibility on next year's supply through discussions with major customers over HBM demand.

SK Hynix's comments not only offer a view on the strength of AI demand and the disruptions caused by U.S. President Donald Trump's tariff policies but also show how the company is fending off rising competition from crosstown rival Samsung Electronics 005930.KS.

In January SK Hynix had said capital expenditure (CAPEX) for 2025 would rise slightly from last year's, which it had earlier expected to be more than 10 trillion won ($7.31 billion).

SK Hynix also said on Thursday that discussions over HBM supply deals with its key customer, which analysts said referred to Nvidia, are proceeding as planned.

In March, SK Hynix said it planned to finalise sales with customers for 2026 within the first half of this year.

Its shares were trading up 0.8% as of 0330 GMT, compared with the 0.2% rise in the benchmark South Korean KOSPI index .KS11

TARIFF BOOST

Chaotic U.S. policy and turbulence over tariffs have hurt quarterly earnings of many companies, but SK Hynix said on Thursday its results were helped by demand from customers to increase inventory ahead of potential tariffs.

Earlier this month, U.S. President Donald Trump threatened to introduce tariffs on semiconductors. SK Hynix said in April that the proportion of its exports to the United States was not high, but analysts said the company could face pricing pressure from customers squeezed by U.S. tariffs.

A much-anticipated meeting between U.S. and South Korean officials scheduled for Friday to discuss tariffs was cancelled. Hopes for a deal had risen after Japan and the United States reached a deal on tariffs this week.

SK Hynix said U.S. restrictions on China chips will not have an impact on operations at its China production site.

The company reported a 9.2 trillion won ($6.69 billion) operating profit for the April-June period, up 69% from 5.5 trillion won a year earlier.

That compared with a 9.0 trillion won average forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate. Revenue rose 35% to 22.2 trillion won, a quarterly record.

SK HYNIX VS SAMSUNG

Its profit is double the quarterly operating profit expected by Samsung Electronics, which this month projected a 56% plunge in second-quarter operating profit due to weak AI chip sales.

SK Hynix overtook Samsung Electronics as the world's top memory chipmaker in the first quarter due to its leadership in HBM chips, a crucial component of AI chipsets designed by the likes of Nvidia that assist the processing of vast amounts of data to train AI models.

After posting a series of record profits boosted by strong AI demand, challenges are brewing for SK Hynix in the form of U.S. tariffs and intensifying competition with rivals. Samsung Electronics, for instance, said it has seen meaningful progress on its latest HBM 3E 12-layer chips by redesigning them.

Last Thursday, SK Hynix saw its shares tumble about 9% after Goldman Sachs downgraded the stock to "neutral", expecting HBM prices would decline for the first time next year.

Still, shares of SK Hynix are up 54.7% so far this year, outperforming the KOSPI's 32.7% rise.

Ryu Young-ho, a senior analyst at NH Investment & Securities, said SK Hynix would have been conservative in its investment plan if it had expected Samsung to aggressively enter the HBM market.

"So today's announcement on boosting this year's CAPEX appears to reflect SK Hynix’s confidence," he said.

($1 = 1,367.5700 won)