SK hynix shares fell 10% following the announcement of a record quarter. What spooked the market?
The chipmaker's net profit jumped 13-fold, but this was largely due to one-time factors
SK Hynix's record results have not dispelled concerns about future spending on production expansion and returns to shareholders / Photo: Poetra.RH/Shutterstock.com
The second quarter of 2026 was the best in SK Hynix ’s history, but its record profit fell short of forecasts, and the company’s management presentation of the earnings report lacked details on shareholder payouts and the terms of long-term contracts with customers. In addition, the company announced an increase in capital expenditures. As a result, shares of Nvidia’s main memory chip supplier plummeted in Seoul, dragging down the entire Korean market with them.
Records the Market Fell Short Of
In the second quarter, SK Hynix’s revenue soared 257% year-over-year to 79.3 trillion won ($54.8 billion), while operating profit rose 557% to 60.5 trillion won ($41.8 billion). Net income jumped 13-fold to 93.9 trillion won ($64.9 billion). The latter figure exceeded expectations thanks to one-time investment gains, but revenue and operating profit fell short of consensus estimates, according to Bloomberg.
Sanjiv Rana, head of the research division at CLSA Securities Korea, attributed the weaker-than-expected operating profit to a less favorable sales mix. Concerns were heightened by the outcome of the company’s management meeting with analysts: SK Hynix announced an increase in its capital expenditure plan but provided almost no information on shareholder returns or the pricing terms of long-term contracts, said Etoro analyst Josh Gilbert.
Collapse in Seoul
SK Hynix shares plummeted nearly 20% during trading on June 29 in Seoul, and when combined with the previous session, the decline reached 30%, according to Bloomberg. By the close of trading, the stock had recovered about half of its losses and ended the day down 9.6%. The day before, on July 28, the chipmaker’s shares plummeted on news that a Chinese state-backed company had launched mass production of DUV lithography systems—a first for the country. Investors interpreted this as a sign that China is moving toward technological self-sufficiency in semiconductors at a faster pace.
SK Hynix’s earnings report exacerbated investors’ already nervous sentiment toward artificial intelligence, and the Korean market plummeted. The KOSPI index briefly lost 13% and fell about 20% over two days, triggering a circuit breaker for the second day in a row. At the end of the month, the index is on track for a record drop of about 33%—after posting the best performance in the world at the start of the year, according to Bloomberg.
The pressure on the market was exacerbated by the significant weight of SK hynix and Samsung Electronics in the KOSPI. “When they fall together, there’s nowhere to hide,” Gilbert said. Yoon Jun-won, a fund manager at DS Asset Management, called the scale of the sell-off hard to explain: “It seems like people are just fleeing the market. From a technical and emotional standpoint, these sell-offs are irrational” (as quoted by Bloomberg).
Should I sell or buy?
Despite the sharp decline, Mirae Asset Securities maintained its “buy” rating on SK Hynix shares but lowered its price target from 4.2 million to 2.8 million won, according to Maeil Business. Mirae believes that the price correction, linked to a possible decline in contract prices for memory chips, has ended, but noted that the issue of lithography equipment localization in China remains.
Rana of CLSA Securities views the drop in share prices as a “good buying opportunity.” According to him, the supply of memory chips will remain extremely limited in 2027 as well. Eugene Investment & Securities links a potential stock rebound to SK hynix’s future shareholder-friendly decisions: additional measures could be announced after the fourth quarter and lead to a reassessment of the company’s valuation.
What's next?
Market participants are now awaiting Samsung Electronics’ earnings report, scheduled for July 30, as well as results from U.S. tech companies, according to Bloomberg. A notable feature of the current sell-off is the sharp shift in retail investors’ behavior. During the previous market decline, they regularly bought up stocks that had fallen in price; however, by midday on July 29, they had sold Kospi stocks worth 1.9 trillion won ($1.3 billion). “There were a lot of forced liquidations today. We need to wait until selling by retail investors subsides,” said Jeon In-yoon, head of Fibonacci Asset Management Global.
This article was AI-translated and verified by a human editor
