The ongoing artificial intelligence boom has put two South Korean chipmakers, Samsung Electronics Co SSNLF and SK Hynix, in the spotlight. Industry experts are now discussing which company is the better investment in this AI-driven market.
What Happened: The AI boom has significantly benefitted major tech companies like NVIDIA Corp NVDA. This has also brought attention to the supply chain for AI, especially the producers of AI graphics processing units and memory chips, reported CNBC on Sunday.
Both Samsung and SK Hynix have been at the forefront of the memory chip market. Samsung, the world’s leading DRAM chip manufacturer, recently reported a more than 900% increase in first-quarter operating profit. On the other hand, SK Hynix, after five consecutive quarters of net losses, recorded a net profit of 1.92 trillion South Korean won ($1.39 billion) in the first quarter.
When it comes to better AI investment, experts are divided. Trent Masters, global portfolio manager at Alphinity Investment Management, favors SK Hynix due to its early leadership in HBM3 and its pure memory play. He said, "While Samsung and Micron are starting to close the technology gap, the trust and dependability of SK Hynix during the initial HBM ramp will ensure that they will retain a strong presence with these customers into the future."
Nam Hyung Kim, partner at Arete Research, also prefers SK Hynix, citing its higher profit margins and Samsung’s ongoing challenges in its foundry business. "A view of memory market strength (HBM demand and tight legacy DRAM markets leading to pricing strength) is best reflected through ownership of SK Hynix," he said.
However, Sung Kyu Kim, analyst at Daiwa Capital Markets, sees a buying opportunity for both companies. He anticipates Samsung catching up in the near term and potentially offering more upside to its stock price.
Why It Matters: The AI boom has led to a surge in demand for memory chips, particularly those used in AI chipsets. This has been a significant factor in the strong performance of Samsung and SK Hynix, both of which are key suppliers to Nvidia, a major player in the AI market.
SK Hynix’s HBM chips, crucial for AI chipsets, are almost sold out for 2025 due to the increasing demand for AI services, primarily driven by the AI industry’s expansion. This surge in demand has been attributed to the rapid expansion of AI services by businesses.
Moreover, SK Hynix’s plans to invest approximately $4 billion to establish an advanced chip-packaging facility in West Lafayette, Indiana, aligns with the Biden administration’s goals to reestablish the U.S. as a semiconductor powerhouse. This investment is expected to further strengthen SK Hynix’s position in the AI-driven market.
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