SK Hynix (000660.KS)

With this report, we are initiating the first-ever single-company coverage at Market Sentiment. SK Hynix is the largest position in our Advanced Packaging portfolio and is perfectly positioned to capitalize on the AI Capex boom. Let’s dig in:...

Then AI changed everything — models required enormous amounts of memory to operate, and AI-generated images and videos required significant storage. With companies spending hundreds of billions in capex, the demand for DRAM and NAND skyrocketed, far outstripping the available supply. As a result, SKY Hynix’s revenue tripled from $22.8B in 2023 to $66.3B in 2025.

The company operates in two major segments:

#### DRAM (Dynamic Random Access Memory)

DRAM refers to the volatile, temporary memory used in servers, PCs, smartphones, and GPUs. In simple terms, DRAM is the memory where your device stores applications you are currently working on. Without it, the computer must search every file in permanent memory to retrieve it. If you've ever experienced lag when too many applications are open, it’s likely because DRAM was full and the computer was using slower, permanent storage. The segment accounts for 76% of the company's total revenue, and SK Hynix has a ~35% market share in the DRAM market.

The DRAM segment also contains the highly sought-after high-bandwidth memory _(HBM)._ HBMs are created using advanced pacdeliver significant performance gains in memory speed, without which AI processors would sit idle most of the time waiting for data transmission. Given that HBM has emerged as a critical bottleneck for AI chips, the segment is projected to grow at a robust 40% CAGRover the next three years.

#### NAND Memory

NAND refers to the permanent, non-volatile storage that retains data without any power. This segment accounts for 23%s revenue.

Only five years ago, SK Hynix's NAND segment was widely viewed as a loss-making “secondary” business. The acquisition of Solidigm _(a semiconductor subsidiary)_ for $9B from Intel in 2021 has helped turn around this segment. The company has strategically moved away from the volatile consumer SSD market to prioritize high-margin enterprise SSDs (eSSDs) for AI data centers. This pivot towards specialized, high-capacity storage has further boosted the company’s profitability and overall margins.

Sandisk ($SNDK), which has delivered 1500%+ returns to shareholders over the past 6 months, operates exclusively in this segment. SK Hynix has substantial exposure to the segment and is an alternative to Sandisk at a much more attractive valuation.

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Capitalizing on AI-manufactured scarcity

Being positioned perfectly during the perfect storm of supply constraints and surging demand meant the stock has quadrupled over the last year, after being flat for the previous 5 years.

Based on our valuation model and industry projections, we believe there is significant upside still left in the stock.