(Bloomberg) — Traders are bullish on the possibility for extra features in shares of Nvidia Corp.’s prime reminiscence provider SK Hynix Inc., which stay low cost even after an enormous runup.
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The South Korean firm’s inventory has surged 96% because the begin of final yr, far outpacing reminiscence rivals Samsung Electronics Co. and Micron Expertise Inc. But it’s nonetheless buying and selling at simply 11 instances ahead earnings estimates, in contrast with 15 for Samsung, 30 for Micron and 27 instances for the Philadelphia Semiconductor Index.
The secret is that SK Hynix was in a position to get a bounce on the competitors out there for high-bandwidth reminiscence (HBM), which might provide the big volumes of information on the excessive velocity required by AI. That’s helped it garner higher investor consideration after years of enjoying No. 2 to Samsung.
“It’s too dangerous to not personal SK Hynix within the portfolio,” mentioned Yoon Joonwon, a fund supervisor at DS Asset Administration Co. “As international massive tech companies are seeing additional features, buyers predict extra upside in SK Hynix too.”
HBM encompasses a stack of DRAM optimized to work alongside accelerators, processors used extensively within the coaching of AI. Not topic to the cyclical demand and pricing of commoditized conventional reminiscence, HBM chips are way more profitable.
Excessive-priced AI merchandise helped SK Hynix report an working revenue for the three months ended December, after four-straight quarterly losses.
HBM Chief
The corporate is seeking to keep its lead over Samsung and Micron in AI. To that finish, SK Hynix has reportedly tied up with prime foundry Taiwan Semiconductor Manufacturing Co. to develop its subsequent technology HBM chip. SK Hynix declined to touch upon the report, whereas TSMC didn’t reply to requests from Bloomberg.
That information is “triggering market hypothesis about SK Hynix being a transparent winner within the HBM house,” and displays robust demand for its merchandise, JPMorgan Chase & Co. analyst Jay Kwon wrote in a analysis observe this week. “We count on robust share momentum to proceed close to time period.”
Kwon is one in all 40 analysts which have a buy-equivalent score on the inventory, with simply three maintain suggestions and no sells. The typical sell-side value goal signifies an anticipated return of 20% over the subsequent 12 months.
Choices merchants are bullish too, with this yr’s common each day name quantity up greater than 57% from final yr, in accordance with Bloomberg calculations. The preferred contract traded on Thursday was a wager that the inventory will rise one other 4% by mid-March.
Upcoming catalysts embrace Nvidia’s earnings report on Feb. 21, which ought to present extra particulars on the outlook for AI. Traders may also hold a watch out for information of additional partnerships or progress by rivals for any early indicators of management change on this burgeoning subject.
“Wielding a giant aggressive benefit in HBM, SK Hynix may seize a big market share within the DRAM business,” Masahiro Wakasugi, an analyst at Bloomberg Intelligence, wrote in a observe. “Its HBM DRAM dominance is poised to persist within the close to time period, given its deep-rooted relationships with AI processor designers.”
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–With help from Jane Lanhee Lee.
(Updates share knowledge as of Friday shut in Seoul)
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