KB Securities maintained a “Buy” rating and a target price of KRW 1.7 million on SK Hynix, stating that memory semiconductor demand remains robust despite escalating geopolitical tensions in the Middle East. The firm added that any short-term stock price correction should be viewed as a buying opportunity.
Kim Dong-won, head of research at KB Securities, said on March 31 that second-quarter memory chip orders are exceeding prior expectations. “AI-driven memory demand is in a structural growth phase and remains resilient even amid external uncertainties such as Middle East conflicts,” he noted.
KB Securities projects that U.S. big tech companies will increase AI-related capital expenditures by 84% year-on-year to KRW 1,100 trillion by 2026. As investments in AI data centers and power infrastructure expand, bottlenecks in memory supply are expected to persist over the long term.
Major tech firms are reportedly seeking to secure stable memory supply through large prepayments and long-term agreements (LTAs) spanning three to five years. However, due to limited wafer production capacity, KB Securities estimates that LTAs will account for less than 20% of total memory production capacity.
Currently, demand fulfillment from key customers stands at around 60%, indicating a tight supply-demand balance that could last for at least three years. Despite ongoing capacity expansions, wafer constraints are likely to persist, supporting upward revisions in SK Hynix’s earnings outlook.
KB Securities forecasts that SK Hynix’s operating profit will surge 275% year-on-year to KRW 177 trillion in 2026. The firm also highlighted AI efficiency technologies such as Google’s “TurboQuant” as a demand catalyst. These innovations lower barriers to AI inference while increasing computational workloads and memory requirements, ultimately expanding overall AI demand—a phenomenon the firm described as a “rebound effect.”
Kim added, “Short-term volatility driven by geopolitical risks and developments like Google’s TurboQuant should be seen as a meaningful entry point, as earnings surprises and upward revisions are likely to continue in the near term.”
