SK Hynix will release its financial report for the third quarter of 2026 after the U.S. stock market closes on Tuesday. The company also confirmed that it will announce new shareholder return measures on the same day. After several months of adjustments to the AI related assets, this financial report will also serve as the latest opportunity for the market to assess the prosperity of high-bandwidth memory (HBM) and the sustainability of demand for AI infrastructure.
Before the financial report was released, on Tuesday, the stock price of SK Hynix ( SKHY.O ) in the South Korean market rose by more than 5% at one point, and Samsung Electronics also saw a gain of over 5%, driving the South Korean Kospi index to rise by up to 4.5% during trading. However, after the previous cooling down in AI trading, Kospi has still fallen by more than 35% from its June high, and since the beginning of this year, foreign investors have sold a net of over $150 billion worth of South Korean stocks.
This rebound occurred after the financing concerns regarding AI temporarily eased. The advancement of IPO and Meta towards large-scale equity financing, as well as SpaceX reaching new equipment financing arrangements, have once again boosted market expectations for the sustainability of AI's infrastructure investments. The financial reports that Hynix is about to release will further test whether this improvement in risk appetite can continue.
The primary concern of the market remains whether the storage demand for AI can continue to support the current high profit levels. SK Hynix and Samsung Electronics together control approximately 60% of the global DRAM revenue, with a combined market share of over 80% in the HBM market. As the demand for high-bandwidth memory from AI accelerators such as NVIDIA increases rapidly, these two companies have become significant beneficiaries of the expansion in global data center capital expenditures.
Order visibility remains high at present. KB Securities analysts Jeff Kim estimate that more than 70% of the memory to be produced next year by South Korea's two major storage chip manufacturers is already covered by five-year supply agreements with large technology companies, leaving less than 30% available for supply to other customers such as smartphones and PC.
This ratio is also an important basis for the market to determine whether the current shortage of storage chips is supported by actual orders, or whether it relies more on the ongoing expansion of AI capital expenditures. Global X Management investment strategist Billy Leung stated that the price of storage chips changes daily, making it one of the most real-time indicators for observing AI demand. This week's financial reports will provide important data to test the current AI investment cycle.
In the past few weeks, investors' scrutiny of the return on investment in AI infrastructure has significantly intensified. There have been delays in some data center projects of Oracle, the yield on CoreWeave bonds has risen, and the stock price has fallen. The IPO plans of some AI infrastructure companies have also been impacted by market fluctuations. Market concerns are gradually shifting towards whether large technology companies can generate sufficient revenue to cover the continuously rising costs of data centers, chips, and financing.
This change has already been reflected in the stock prices of SK Hynix and Samsung Electronics, with both companies currently down by about half from their June highs. The enthusiasm for high-leverage trading surrounding SK Hynix has also significantly declined.
Two funds, which were launched in the United States in July of this year and offered SK Hyundai ADR double long and short positions respectively, will be liquidated around November 12th. The asset sizes of both funds have shrunk by more than 60% from their peak levels, and currently total only about 1.3 million US dollars. Among them, the long position product has fallen by more than 5% since its launch, while the short position product has fallen by 42%. During the same period, SK Hyundai ADR has risen by about 5%.
Therefore, investors' focus on this financial report is no longer limited to third-quarter revenue and profits. Whether orders have been locked in through long-term contracts, whether major customers continue to increase their investment in AI servers, and whether the company will maintain a relatively restrained pace of capacity expansion despite high prices for storage chips are becoming more important indicators to watch.
Large capital expenditure companies such as Samsung Electronics, Japan's Kioxia, Alphabet ( GOOGL.O ), Microsoft ( MSFT.O ), and Amazon ( AMZN.O ) will also disclose their financial results or latest operational data this week. The market will cross-check the sustainability of demand for AI servers and infrastructure by analyzing data from both chip suppliers and data center customers.
Apart from the requirements of HBM, the shareholder return plan that Hynix is about to announce, represented by SK, may become another key factor in this financial report.
SK SK Hynix confirmed on Monday that the company is researching various shareholder return plans, which are scheduled to be announced along with the third-quarter financial results, but no specific details were disclosed. Previously, the South Korean newspaper Dong-a Ilbo reported that the company was considering distributing a special dividend of approximately 16 trillion Korean won, equivalent to about 12 billion US dollars, with the funds possibly coming from profits obtained from the sale of investments related to Japanese memory chip manufacturer Kioxia.
On the same day, the Seoul Economic Daily cited industry insiders as saying that SK Hynix is preparing to announce a new shareholder return that could potentially reach up to 60 trillion Korean won, which is approximately 45 billion US dollars. This figure is still just media speculation at present, and the company has not yet confirmed the final amount or the specific implementation method.
The Dong-A Daily previously estimated that after SK Hynix sold its investments in Kioxia in the first and second quarters of this year, it might have accumulated approximately 20 trillion Korean won in investment returns, and is considering returning about 80% of that amount to shareholders through a special dividend. SK In 2018, Hynix invested about 4 trillion Korean won in Kioxia through a consortium led by Bain Capital.
However, the capital relationship between the company and铠侠 has not completely ended. SK HiSilicon currently still holds bonds of铠侠 that can be converted into nearly all the voting rights of an investment vehicle, which in turn holds 14% of the shares in铠侠. Therefore, the disposal of related assets and the final return arrangements will still need to be subject to the official disclosures made by the company.
SK Hynix has previously significantly increased its capital return efforts. In August, the company announced that it would repurchase and cancel treasury shares worth 40 trillion Korean won, and also plans to use more than 50% of the free cash flow generated from 2025 to 2027 to enhance shareholder returns.
As the AI storage chips drive rapid profit growth, the stock price has fallen significantly from its high levels, and the pressure on investors to demand that the company release more cash through dividends and share repurchases continues to rise.
Recently, the prices of memory chips have still been supported by a tight supply, and many institutions believe that the shortage in the industry may continue. Citibank analyst Peter Lee expects that this current super cycle for memory chips could last for nine years; meanwhile, Macquarie believes that the current market is more characterized by a structural shortage rather than an impending oversupply.
However, the market has already begun to trade in anticipation of the next downward cycle, with a significantly increased sensitivity to new capacity additions and capital expenditures by large technology companies. Long-term supply agreements can improve the visibility of orders, but they cannot completely eliminate the cyclical risks associated with a slowdown in infrastructure investment, rising financing costs, and the concentrated release of future new capacity.
SK Last week, Hynix also suspended the plan for its Solidigm to go public in the United States, with the company citing increased financial market volatility as the reason. This plan had previously attracted attention from investors and regulators due to the potential impact on equity structure and valuation that a public offering could have.
In this environment, the financial reports after the market on Tuesday need to answer three questions simultaneously: whether the HBM and DRAM orders can maintain their current intensity, how the company will arrange for additional production capacity during periods of tight supply, and what scale and implementation method will ultimately be adopted for the returns to new shareholders.
The rebound of Asian chip stocks on Tuesday has already reflected some of the optimistic expectations in advance. The subsequent trend will depend more on the latest guidance provided by SK Hynix regarding future demand, order coverage, and capital expenditure.
