SK Hynix’s profit jump shows AI demand is going strong

South Korean memory maker SK Hynix returned to profitability in the first quarter after last year’s downturn with flying colors backed by the AI boom.

The company said on Thursday that it recorded 2.88 trillion won in operating profit in the January-March quarter, beating estimates of South Korean analysts by close to 40%. Its revenue also surged 144.3% to 12.42 trillion won, reflecting strong sales for memory chips across the board.

SK Hynix is the main supplier of high-bandwidth memory (HBM) to Nvidia for their AI chip platform. HBM is composed of multiple DRAM dies stacked vertically, providing the high speed needed in AI chips.

The popularity of AI services such as ChatGPT is fueling demand for memory chips to servers that back them up. Compatriot Samsung is also seeing a demand boom as it expects its profit to surge 900% in the same quarter.

SK Hynix said it was increasing sales of products for AI servers while also seeing high demand for premium embedded solid-state drives, which allowed its NAND business to return to profitability.

SK Hynix said it plans to secure more customers for HBM3E, which went into production in March, going forward while also focusing on other high-end DRAM products such as DDR5 aimed at servers.

Meanwhile, the company announced a day before that it plans to spend over 20 trillion won ($14.5 billion) to build a new chip production facility, called M15X, dedicated to DRAM production in Cheongju, South Korea, which will start mass production in 2025.