Riding high on a surge in demand for AI chips, SK hynix is expected to log an operating profit of over 8 trillion won ($5.43 billion) for the fourth quarter of last year, according to analysts, outperforming its bigger rival Samsung Electronics.

This would make SK hynix -- the world’s second-largest memory chipmaker -- the top profit earner among South Korea’s listed firms for the October-December period.

The jump in SK hynix’s profit is largely attributed to its high bandwidth memory chips, a critical component for graphics processing units that power generative AI systems like ChatGPT. SK hynix is a key supplier of HBM chips for US AI giant Nvidia.

Observers say the increase in HBM shipments helped SK hynix to offset falling prices for legacy memory chips, such as NAND flash and general dynamic random-access memory, or DRAM. HBM's share of total DRAM sales are estimated to make up 40 percent in the fourth quarter, up from 30 percent in the third quarter.

On Monday, analysts raised their forecasts for SK hynix’s operating profit for the fourth quarter to the low-to-mid 8 trillion won range, up from October's initial estimates in the 7 trillion won range.

Han Dong-hee, an analyst at SK Securities, projected SK hynix’s operating profit at 8.1 trillion won, while Lee Su-rim, of DS Investment & Securities predicted 8.2 trillion won.

The expected earnings will represent a substantial increase from a year earlier of 346 billion won in the fourth quarter in 2023, as well as from the previous third quarter’s 7.3 trillion won.

SK hynix’s profit is expected to overtake its larger rival Samsung Electronics’ fourth-quarter profit, which was 6.5 trillion won, according to the firm’s earnings guidance released last week.

The gap is even more pronounced when comparing the chips divisions alone. Local brokerages estimate Samsung’s semiconductor arm, the Device Solutions division, to post an operating profit of approximately 3.5 trillion won for Q4, bringing the annual total to around 15.72 trillion won. In contrast, SK hynix’s operating profit for last year is expected to be around 23.42 trillion won, significantly outperforming Samsung’s DS division.

Analysts remain optimistic about SK hynix’s prospects this year. The company is enjoying market dominance in the HBM market, supplying its latest fifth-generation HBM3E chips to Nvidia, and the next-generation HBM4 planned for this year.

Chae Min-sook, an analyst at Korea Investment & Securities, said "SK hynix's dominance in the HBM market is expected to continue into this year."

Meanwhile, Samsung is still waiting for its HBM3E chips to pass Nvidia’s quality tests. However, at CES last week, Nvidia CEO Jensen Huang hinted at Samsung’s progress in its HBM chips development. If Samsung starts supplying HBM chips to Nvidia this year, it could potentially hold down SK hynix's sole dominance.

Meanwhile, foreign investors are expressing confidence in the Korean stock market, betting heavily on SK hynix. According to the Korea Exchange on Sunday, foreign investors made net purchases of 1.55 trillion won in the country’s main bourse Kospi from Jan. 1 to Jan. 10, marking a shift from the five consecutive months of net selling from August to December last year.

Notably, SK hynix was the most popular stock, with a purchase of net 961 billion won, followed by Samsung Electronic with 237 billion won.

Foreign ownership of SK hynix shares reached 55.37 percent as of Monday -- the highest since July last year.

By Ahn Sung-mi (sahn@heraldcorp.com)