00:00I just wonder what your key takeaways from those SK Hynix numbers were.
00:05Well, the numbers are very surprising. SK Hynix, we thought they would report record earnings,
00:12and they did, but it was much higher than we expected. So we were expecting 50 trillion,
00:18but they did more than that. And the profit is amazing, 37 trillion Korean won. So this trend
00:29we see coming from AI is affecting the memory market a lot, and SK Hynix is benefiting the most,
00:36we can see. Talk to us about the CapEx story as well, because SK Hynix is setting aside a
00:42significant sum here also. Right. So SK Hynix, they were reluctant in the beginning of the year
00:54because they weren't sure if this AI boom was here to stay or would go away. And it's a risky
01:00move
01:01to invest. But now they made the decision that they have to invest because AI companies like
01:08OpenAI and Anthropic have been showing good revenue numbers now. And so it looks like the AI trend is
01:17real and it's generating revenue. And there's another factor. They see CXMT, their largest Chinese
01:25competitor, investing heavily. And so they're feeling the heat. So they made the decision to invest in
01:32CapEx. And this will be a big change for the memory industry.
01:39Tom, it's interesting. Everyone's still calling this a trend, right? Do you see a situation where
01:44we're starting to see chip and memory stocks not being traded and treated like a commodity anymore
01:51and not being susceptible to the usual kind of boom-bust cycle that we might see? They seem
01:56a lot more intrinsically tied to AI companies, AI accelerator projects and those prospects.
02:06Well, this is a big super cycle and it's lasting longer than we expected. Actually,
02:12if we look at the Q2 contract prices, they're still rising. So it's not going away. And we've
02:20never seen such a cycle being extended to such a long period. But definitely the memory market
02:27is cyclical. There are ups and downs. We just have longer cycles sometimes. So the downturn will
02:36definitely happen. But it will probably happen at a time we never expect. But you can say that the need
02:44for memory from the AI side is going to continue. But as you see, companies like SK Hynix invest more,
02:54and then companies like CXMT from China invest even more, there will at a certain moment be oversupply in the
03:06industry. And that's what everyone is fearing. But the problem is no one knows. And it doesn't
03:11seem to be coming this year or even early next year. So they've made decisions to invest with confidence.
03:22You've mentioned one of the challenges being China. The other one, obviously, in a broadly macro sense,
03:28is what's going on in the Middle East. You said that it's minimal, the disruption. Do you see a situation
03:34where the commodities price pressure, the energy price pressure starts to have an impact on these
03:41boundaries on these on production and costs? Yes, of course, the crisis in the Middle East is going to be
03:52a worldwide
03:53problem. And actually, oil prices are very important because this is linked to electricity power and power is very
04:05important for AI. So right now, it's not just memory that is in shortage. It's power. It's electricity that's also
04:14very in a very tricky situation where demand is exceeding supply. So if oil prices go up and if energy
04:24prices go up,
04:25it will affect the AI industry and then AI companies will have to slow down. And that could affect the
04:34memory
04:35industry. But right now, it's not just AI. We see demand for better memory in PCs, mobile, everywhere. So
04:50there could be some impact. But unless the oil prices go beyond 100, 120 per barrel, it won't be it
05:02won't slow
05:02down the AI boom right now. In terms of SK Hynix, it's just been an incredible 12 months. Really, that
05:11stock is up by
05:11more than 570 per cent on year and about 90 per cent year to date. How much more upside do
05:18you see for SK Hynix? Do you have a
05:21target for the year end?
05:24Right. So the surprise we see in the QN numbers comes from the fact that the long term contract prices
05:36were not rising in
05:37January, but it started to rise in February. So companies like Apple, Samsung, Huawei, Motorola,
05:46they make long term contracts. The long term contract prices started to rise in February. And we saw this
05:55rise rapidly in March. And that was the extra margin, the extra profit that SK Hynix earned in Q1.
06:03So we see this continuing in April. According to our price tracking in April, the prices are rising even
06:13more. So it's not slowing down. So we expect a better Q2. So the profits, the Q1 profits are actually
06:25going to
06:26be smaller than the Q2 or Q3 and Q4. So I can just say that until the end of this
06:33year, there's definitely
06:34a lot of upside for SK Hynix.
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