SK Hynix Posts Record 72% Margin, Beating Nvidia and TSMC

Thursday, SK Hynix released the best quarterly results in the company's history. These results change the way semiconductors are profitable in the age of AI.

Operating sales topped 50 trillion won for the first time in a quarter, at 52.58 trillion won ($35.6 billion). Operating profit soared to 37.61 trillion won, giving the company a 72% operating margin. That number is more than just a company record. It's much higher than TSMC's 58.1% margin for the same quarter and higher than Nvidia's industry high of 65% in Q4 2025.

Net profit hit a new high of 40.346 trillion won ($27.28 billion), which is up 398% year-over-year and a lot more than the 28.109 trillion won that FactSet said analysts thought it would be.

What Drove a 72% Margin in a Traditionally Slow Quarter

Q1 is usually the slowest time of the year for the memory business. SK Hynix's 72% operating margin in the off-season is the clearest sign that demand for AI infrastructure is no longer tied to standard semiconductor cycles.

The basics are easy to understand. According to Mirae Asset Securities, the average selling price of DRAM went up by 60.8% from one quarter to the next, and the average selling price of NAND flash went up by 55.3%. Counterpoint Research says that the DRAM market grew by 30% from one quarter to the next for two quarters in a row. High Bandwidth Memory (HBM) was the main cause of the price increase.

SK Hynix said the performance was due to three things: higher prices for DRAM and NAND, more high-value products making up the company's revenue, and the fact that AI computing infrastructure has kept global high-end memory capacity constantly undersupplied. During the call after the profits report, CFO Kim Woo-hyun said that demand for chips will likely continue to be higher than supply for the next three years, especially for HBM products.

The HBM Race: Leading Now, But Samsung Is Closing

SK Hynix is the market leader in HBM, which is a key memory component in Nvidia's AI accelerators. They are able to keep their place by executing quickly and integrating deeply with their customers. The company has been Nvidia's main HBM supplier for the HBM3 and HBM3E generations. They are now working with users to speed up development of HBM4, and mass production is set to start on time. Customers will get samples of HBM4E in the second half of 2026, and it will be available for sale in 2027.

Things are getting more fierce. In February, Samsung said that it had made more of the more advanced HBM4 than SK Hynix. They plan to give out samples of the more advanced HBM4E later this year. Micron is also putting a lot of money into HBM capability. The three-way race for next-generation HBM supplies is getting tougher just as demand is rising.

SK Hynix has finished making the first 1cnm LPDDR6 and has started mass production of the 1cnm 192GB SOCAMM2, which is optimized for Nvidia's Vera Rubin platform. The company released the PQC21 client SSD using 321-layer QLC technology in NAND flash. They also have a business SSD line-up made for AI data centers and AI PC storage markets.

The Capital Deployment: $600 Trillion Won Vision, Starting Now

Now that SK Hynix is making more money than ever and has a net cash position of 35 trillion won and interest-bearing debt lowered to 19.3 trillion won, it is starting the biggest program in its history to increase its capacity.

Capital expenditures for 2026 will be much higher than the 30.2 trillion won that was planned for 2025. The focus will be on three areas: the Yongin semiconductor manufacturing hub (an estimated 600 trillion won investment, with 31 trillion won already committed), the M15X production line ramp-up, and the purchase of EUV equipment. The business has promised to buy about $8 billion worth of ASML extreme ultraviolet equipment by the end of 2027.

An extra 19 trillion won will be put into a new advanced chip-packaging plant in Cheongju. This will be in addition to the U.S. packaging facilities that are already being built in Indiana. The investment in packaging shows that the value of semiconductors is shifting structurally: more and more, it is being made in advanced packaging rather than in making raw wafers.

This year, SK Hynix is also trying to get listed in the U.S. so it can tap global capital markets and get the money it needs to make the kinds of investments it wants to make. Shares have already gone up almost 90% so far this year. On Thursday, they quickly hit an all-time high before reversing and closing about 2% lower. This was just a normal positioning change after record earnings, not a fundamental signal.

Geopolitical Risk: Limited Direct Impact, Monitored Closely

The conflict in the Middle East adds a second dimension to the supply line. Executives at SK Hynix said that the region is a major source of helium, tungsten, and other important materials used to make chips, but they thought that the effect would be small because they already had enough supplies and bought from a variety of sources.

The company said it is well-equipped to handle shipping problems, which sounds more likely given its 54.3 trillion won cash and equivalents balance, which gives it a lot of operations freedom.

What SK Hynix did in Q1 supports the HBM supercycle theory in a way that not even the most optimistic analysts had fully thought through. This is not a cyclical recovery; it is a fundamental regime change in memory chip economics driven by AI infrastructure buildout, as shown by the 72% operating margin in a traditionally weak quarter and the CFO's prediction that demand will exceed supply for three more years.

The main risk in the short term is Samsung's push to compete in HBM4 and whether SK Hynix's HBM4E schedule will hold. The most important thing for the long run is whether the Yongin hub opens on time to meet the next wave of demand. Both should be closely watched as advice for Q2 shapes what the market expects.