Key Points
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SK Hynix fell around 20% in October, driven by AI bubble fears and a Chinese competitor’s design claims.
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The company’s HBM4 memory, used in AI chips, entered mass production in the third quarter.
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The stock carries real risk from customer concentration and its sharp 2026 run-up.
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Memory stocks went through an actual bloodbath in mid-October. A Chinese chipmaker claimed a design breakthrough, artificial intelligence (AI) bubble fears flared up again, and investors yanked more than $480 million out of a memory-focused exchange-traded fund (ETF) in a single day, the largest one-day outflow on record for that fund. The combined market value of the biggest memory makers dropped by more than $700 billion in a matter of days.
As of this writing, shares of SK Hynix (NASDAQ: SKHY) alone fell roughly 20% this month. But the memory chip company also just posted the best quarter in its history. That whiplash tells you almost everything you need to know about this stock right now: The panic was about sentiment, and the earnings were about reality.
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What’s going on in this sell-off?
One of the triggers was a Chinese company’s claim that it had made a major advance in memory chip design, which spooked investors and prompted questions about whether the AI memory boom was overbuilt. Add in broader worries about whether all the money pouring into AI data centers will actually pay off, and you had a classic fear-driven dump.
One analyst called it a reaction to financing anxiety rather than a traditional memory-cycle slowdown, per the Benzinga news site. That distinction matters. Nothing about SK Hynix’s actual business changed during this month. Its order book didn’t shrink. Its factories didn’t go idle. The stock price just got repriced for a worst case that hadn’t happened yet.
What SK Hynix is doing
Then came the numbers. Late this month, SK Hynix reported revenue of 104.6 trillion South Korean won ($78 billion) for the third quarter, its first quarter ever above the 100 trillion won ($75 billion) mark, up 328% from a year earlier, with an operating margin around 80%, higher than Nvidia‘s. The stock jumped more than 10% on the news. The engine behind all of it is HBM, the high-bandwidth memory that sits next to AI chips and feeds them data fast enough to keep up with the processing.
SK Hynix’s newest version, HBM4, entered mass production and began shipping in Q3, and management expects it to outsell the prior generation, HBM3E, by Q4. The company also told investors that its DRAM and HBM output is essentially sold out through 2029, with tight supply expected to persist through 2030. That’s not marketing talk, that’s a company telling Wall Street it can’t make enough of the product fast enough, which is about as good a problem as a chipmaker can have.
On top of that, SK Hynix is planning roughly 100 trillion won ($75 billion) in shareholder returns this year via dividends and buybacks. The 2027 setup looks even stronger than this year: SK Hynix has already locked in pricing and volume agreements with major customers for next year’s HBM4 output, and industry estimates put the company supplying somewhere around 60% to 70% of the HBM4 going into Nvidia’s next-generation Vera Rubin platform.
That said, I wouldn’t pretend this stock is risk free; just look at this week and month alone. The stock has already run up hard, hitting a record high in September before the October sell-off, which means much of the good news is already priced in. Customer concentration is real too; a huge chunk of SK Hynix’s HBM demand traces back to a handful of AI chip buyers, Nvidia chief among them, and any slowdown in AI infrastructure spending would hit this stock harder than a more diversified chipmaker. This is a somewhat cyclical business that has been wrong-footed by its own cycles before.
Why I’d still buy it
What tips the scale for me is that SK Hynix just backed up its stock price with actual, audited results, not projections, in the same month the market decided to panic about it. A company that’s sold out through 2029 and generating an 80% operating margin isn’t hoping AI demand holds up; it’s already living proof that it is. SK Hynix’s U.S. shares, which only started trading on Nasdaq this past July, give American investors a direct way into that story for the first time.
I think the October sell-off was the market flinching at a headline, and the October earnings were the company responding with its actual business results. For investors willing to stomach the volatility that comes with any AI-adjacent stock, that combination is worth buying into now rather than waiting for a calmer entry point that may never come.
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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
