KB Securities raises SK Hynix's target stock price to 3 million Korean won... Led by artificial intelligence

KB Securities on the 15th raised the target stock price for SK Hynix from 2.8 million won to 3 million won, and analysis pointed out that, as artificial intelligence spreads, the surge in memory demand is simultaneously driving performance improvement and stock revaluation. The securities industry is especially focused on the possibility that corporate earnings growth expectations may outpace stock price increases.

Following the target price adjustment on the 12th, KB Securities only three days later raised it again by 200k won. Research Director Kim Dong-yuan predicts that in the second quarter of this year, the prices of DRAM and NAND will rise more strongly than previously expected. He explained that the current increase in memory prices is mainly driven by demand for server-use DRAM and enterprise solid-state drives (used for data centers and servers). In particular, AI data center companies have absorbed 70% of total memory shipments, indicating a significant concentration of demand.

This background stems from the spread of proxy-type artificial intelligence. Proxy AI refers to an AI form that surpasses simple question-and-answer and can perform tasks independently. During this process, the number of tokens used, which is the data unit AI needs to process, is rapidly increasing. Based on the growth trend of token usage among the four major US tech giants in the first quarter of this year, KB Securities estimates that related demand could expand threefold in the next six months, and sevenfold on an annual basis. If this trend continues, memory semiconductors could achieve larger sales volumes and higher prices.

Accordingly, KB Securities forecasts that SK Hynix’s operating profit in the second quarter of this year will reach 70 trillion won, about eight times that of the same period last year. Additionally, the full-year operating profit forecast has been raised to 277.31 trillion won, an increase of 2.7% from the previous estimate of 270.094 trillion won; next year’s operating profit forecast has also been adjusted upward from 418.088 trillion won to 428.002 trillion won, a 2.4% increase. The operating profit margin is expected to reach 78.1%, ranking first globally. However, the figures proposed are at very high levels compared to the performance scale usually used in the market, so it is necessary to pay attention to future actual announcements and changes in estimates by securities firms.

Supply factors are also viewed as favorable for industry prosperity. Considering the demand expectations of major customers for next year, memory supply is likely to be tighter next year than this year, and the full-scale commissioning of new memory production lines is planned for after next year, making it difficult for supply to increase significantly in the short term. Additionally, the expansion of equipment investments by US tech giants is seen as a supporting factor for demand. KB Securities predicts that the equipment investments of the four major tech giants, including Alphabet and Amazon, will reach $725 billion this year, a 77% increase from last year, and will exceed $1 trillion next year. This trend could sustain firm memory prices and upward revisions of performance for some time in the future.