SK Hynix Still Trades Below 4x Earnings.

Hey there, bargain hunter. A memory chip maker just posted a quarter so good that most software companies would blush, and the market’s first reaction was to price it at roughly what you’d pay for a struggling retailer. Let’s run the numbers before the rest of the world catches up.

Scoreboard

SK hynix posted operating profit of ₩83.33 trillion ($62.8 billion) in the third quarter, up 557% from a year earlier, beating the ₩76.96 trillion analyst consensus compiled by FnGuide. Revenue hit ₩104.62 trillion, up 32% quarter over quarter and 328% year over year, the first time in the company’s history it crossed ₩100 trillion in a single quarter. Operating margin came in at 80%, making this the sixth consecutive quarter of record results. The Seoul-listed shares closed around 11% higher on Wednesday.

What Actually Happened

Bears had been hammering this stock for months on fears that hyperscaler AI capex would stall. Shares had fallen roughly 20% between September 1 and Tuesday, despite repeated earnings records, as investors questioned whether big tech’s AI investment could sustain its pace. Wednesday’s numbers were the direct rebuttal.

The results were driven by soaring memory prices, mass production and shipments of HBM4, and a 40% sequential surge in server DDR5 sales. Average selling prices for DRAM rose by the high-20% range quarter over quarter, and NAND flash ASP rose by the mid-20% range. Both volume and price moved together. That is how you get an 80% operating margin in a commodity business.

What the Business Actually Is

SK hynix, alongside Samsung Electronics and Micron, controls roughly 90% to 95% of global DRAM production capacity. The company controls between 50% and 58% of global high-bandwidth memory supply, according to Counterpoint Research, and is a major supplier to Nvidia. HBM is the stacked memory that sits directly next to AI processors and moves data fast enough to keep GPUs from starving. No HBM, no AI server.

The $75 Billion Return Plan

SK hynix announced a ₩100 trillion (about $75 billion) shareholder return plan for 2026, explicitly designed to address the gap between its sluggish share price and record earnings. The plan includes more than ₩30 trillion in cash dividends and more than ₩60 trillion in share buybacks and cancellations.

• The Q3 dividend alone is ₩20,000 per share (₩10,000 base plus ₩10,000 special), totalling about ₩14.1 trillion, payable in December 2026.
• At roughly $737 billion in market cap, the full plan equals about 10% of the company returned in a single year.
• About $26 billion of the $75 billion total is still to come.

Is It Cheap?

This is the crux. SK hynix carries a forward P/E of roughly 3.7 as of late October 2026. For a business generating 80-cent operating profit on every dollar of revenue, that discount demands an explanation. The market’s answer is cyclicality: memory booms end, and when they do, profits collapse faster than prices.

The counter-argument is that this cycle has a locked-in floor. Long-term agreements with 14 key customers, including major cloud service providers, now cover more than 50% of total capacity for 2027 and 2028, and management says DRAM and HBM volumes through 2029 are effectively sold out. Customer demand for HBM currently exceeds twice the volume SK hynix can supply.

Bull / Base / Bear

• Bull: SK hynix has been unable to keep pace with AI market growth, and given the technical difficulty of leading-edge processes and long facility lead times, management expects demand to exceed supply for a period. Earnings keep rising, buybacks shrink the share count, and the multiple re-rates toward peers.
• Base: Growth moderates in 2027 but long-term agreements provide a revenue floor. The ₩100 trillion return plan supports the share price even in a soft patch.
• Bear: Strong prices encourage more production. If supply overtakes demand, prices and profits can fall fast. Hypothetically, halving expected earnings would turn a 5.6x forward P/E into 11.2x, even without a share price change. A memory downturn would land on a balance sheet carrying non-trivial FX and investment-asset exposure.

Action Plan

For a conservative bargain hunter, the risk here is not valuation. The risk is cycle timing. Scale in across three tranches: an initial position now while the earnings beat is fresh, a second on any broad Korea market pullback, and a third only if Q4 guidance for DRAM shipments (guided mid-20% sequential growth) is confirmed. Watch Micron’s next quarterly update as a real-time read on whether HBM pricing holds.

Cheap Investor Scorecard

• Forward P/E below 5x: YES
• Operating margin above 50%: YES (80%)
• Six consecutive record quarters: YES
• HBM sold out through 2029: YES
• Shareholder return plan exceeds 10% of market cap: YES
• Revenue beat consensus by more than 5%: YES (roughly 6%)
• Long-term supply agreements covering more than 50% of 2027-2028 capacity: YES
• Net profit decline risk from FX and investment losses: WATCH
• Commodity DRAM spot price trajectory: WATCH
• Competitor HBM4 qualification progress (Samsung, Micron): WATCH

Bottom Line

If AI capex holds at current levels through 2027, SK hynix’s valuation looks like a genuine pricing error: a company with a locked order book through 2029, a dominant HBM position, and a board committed to returning about $75 billion in 2026, trading under 4x forward earnings. If the cycle breaks early, that cheap multiple gets expensive fast. The long-term agreements reduce that risk more than any previous memory cycle has offered. Scale in accordingly.