Investing.com-- SK Hynix Inc (KS:000660) clocked a stronger-than-expected profit for the first quarter of 2024, as the South Korean memory chip maker benefited greatly from increasing demand in the artificial intelligence industry.
SK Hynix posted an operating profit of 2.89 trillion won ($2.10 billion) for the three months to March 31, compared to a loss of 3.40 trillion won last year. The figure was also much higher than Bloomberg estimates for an operating profit of 1.8 trillion won.
This was driven by revenue surging 144% year-on-year to 14.43 trillion won.
SK Hynix, which is one of the biggest memory chip makers in the world, said the bumper result was driven chiefly by strong AI demand, which was putting the memory market into a “full recovery cycle.”
But SK Hynix also forecast higher capital expenditures for the year on the need to meet increased production requirements, amid swelling demand.
The firm reiterated that it planned to build an advanced packaging facility in the U.S. state of Indiana, with a total investment of $3.87 billion. The facility is set to start production in 2028.
Beyond AI, SK Hynix said it expects a recovery in its other memory sectors- specifically solid state drives and RAM units- in the second half of 2024. Its earnings mark a stark reversal from those seen for the same period last year, where the chipmaker was struggling with a pronounced decline in global chip demand.
SK Hynix is the only producer of advanced high-bandwith memory (HBM) chips used in AI applications, and is also a key supplier to AI giant Nvidia (NASDAQ:NVDA), who uses SK Hynix’s HBM chips in its AI processors.
Currently, SK Hynix is the only memory chip maker in the world to produce HBM3E chips, although rivals Samsung Electronics Co Ltd (KS:005930) and Micron Technology Inc (NASDAQ:MU) have signaled plans to begin production of the same. Recently, Samsung also signaled stronger first-quarter earnings on improved AI demand.
But SK Hynix has so far maintained a lead over its rivals. The firm also recently announced a tie-up with TSM (NYSE:TSM), the world’s biggest contract chipmaker, to begin producing the next generation of HBM chips, HBM4.
Global chip demand has been boosted chiefly by the AI industry, which requires high levels of computing power to run the large-scale language models currently in vogue.
But recently, TSMC- considered a bellwether for the chip industry- warned that AI demand may not be sufficient in offsetting a broader decline in the industry.