Source: Jin Ten Data

SK Hynix will announce its third quarter financial report for 2026 after the U.S. stock market closes on Tuesday. The company also confirmed that it will disclose new shareholder return measures on the same day. After months of adjustments in AI-related assets, this financial report will be the latest window for the market to test the prosperity of high-bandwidth memory (HBM) and the sustainability of demand for AI infrastructure.

Before the earnings release, SK Hynix (SKHY.O) shares rose more than 5% in the South Korean market on Tuesday, while Samsung Electronics also saw a rise of over 5%, pushing the Kospi index up by as much as 4.5% during trading. However, after a cooling off in AI trading, the Kospi is still down more than 35% from its June peak, and foreign investors have net sold over $15 billion in South Korean stocks this year.

This round of rebound occurred after concerns over AI financing temporarily eased. Anthropic is advancing its IPO, Meta plans to undertake significant equity financing, and SpaceX has secured new equipment financing arrangements, which have rekindled market expectations for the sustainability of AI infrastructure investment. The upcoming financial report from SK Hynix will further test whether this risk appetite recovery can continue.

The primary question of market concern remains whether AI storage demand can continue to support the current high profit levels. SK Hynix and Samsung Electronics together control about 60% of global DRAM revenue, with a combined revenue share exceeding 80% in the HBM market. As demand for high-bandwidth memory from AI accelerators like Nvidia rapidly increases, both companies have become significant beneficiaries of the expansion of capital expenditures in global data centers.

Order visibility remains high at present. KB Securities analyst Jeff Kim estimates that over 70% of the memory that South Korea's two major memory chip manufacturers plan to produce next year has already been covered by five-year supply agreements with large tech companies, leaving less than 30% of supply available for other customers such as smartphones and PCs.

This ratio is also a critical basis for the market's judgment on whether the current memory chip shortage is supported by genuine orders or more reliant on ongoing expansion of AI capital expenditures. Global X Management investment strategist Billy Leung noted that the price of memory chips changes daily, making it one of the most timely indicators for observing AI demand, and this week's financial reports will provide vital data to assess the current AI investment cycle.

After cooling off in AI trading, the market is re-examining order quality

In recent weeks, investors' scrutiny of investment returns in AI infrastructure has significantly increased. Some data center projects by Oracle have encountered delays, CoreWeave's bond yields have risen and stock prices have declined, and some AI infrastructure companies' IPO plans have also been impacted by market volatility. Market concerns have gradually shifted to whether large tech companies can generate sufficient revenue to cover the continuously rising costs of data centers, chips, and financing.

This change has been transmitted to the stock prices of SK Hynix and Samsung Electronics, both of which are currently down about half from their June peaks. The momentum surrounding the high-leverage trading involving SK Hynix has also noticeably diminished.

Two ETFs launched in the U.S. in July that provide double long and short exposure to SK Hynix ADRs will be liquidated around November 12. The total asset size of the two funds has shrunk by more than 60% from their peak, currently totaling only about $1.3 million. Among them, the long product has fallen over 5% since its launch, and the short product has dropped 42%, while SK Hynix ADR has risen by about 5% during the same period.

Therefore, investors' attention for this financial report is not limited to third quarter revenue and profit. Whether orders have already been locked in through long-term contracts, whether major customers are continuing to increase their investment in AI servers, and whether the company will maintain a relatively restrained pace of capacity expansion while memory chip prices are high have become more important observation indicators.

Samsung Electronics, Japanese Kioxia, and major AI capital expenditure companies such as Alphabet (GOOGL.O), Microsoft (MSFT.O), and Amazon (AMZN.O) will also disclose performance or latest operational data this week. The market will cross-reference data from chip suppliers and data center clients to verify the sustainability of demand for AI servers and infrastructure.

The scale of shareholder returns becomes another focus

Aside from HBM demand, the upcoming shareholder return plan from SK Hynix may become another core variable of this financial report.

SK Hynix confirmed on Monday that the company is exploring various shareholder return options and plans to announce them alongside its third quarter performance, but did not disclose specific details. Earlier, the Korea East Asia Daily reported that the company is considering a special dividend of about 16 trillion won, approximately $12 billion, which may come from profits obtained from selling investments related to the Japanese memory chip manufacturer Kioxia.

On the same day, the Seoul Economic Daily cited industry insiders stating that the scale of new shareholder returns that SK Hynix is preparing to announce could potentially reach up to 60 trillion won or around $45 billion. This figure is still media-reported, and the company has not confirmed the final scale and execution method.

The Korea East Asia Daily previously estimated that after SK Hynix sold its Kioxia-related investments in the first and second quarters of this year, it may have accumulated about 20 trillion won in investment profits, and is considering returning about 80% of that through a special dividend to shareholders. SK Hynix invested about 40 trillion won in Kioxia through a consortium led by Bain Capital in 2018.

However, the company’s capital relationship with Kioxia has not completely ended. SK Hynix still holds convertible bonds in Kioxia that have almost all voting rights and the investment vehicle holds 14% of Kioxia's shares, so any disposal of related assets and final return arrangements still need to be confirmed through official disclosures from the company.

SK Hynix has already significantly increased its capital return efforts. In August, the company announced it would buy back and cancel treasury stock worth 40 trillion won and plans to use more than 50% of the free cash flow generated from 2025 to 2027 to enhance shareholder returns.

As profits from AI storage chips grow rapidly while stock prices have dropped significantly from their highs, the pressure on investors for the company to release more cash through dividends and buybacks continues to rise.

Financial report guidance will determine whether the rebound can continue

Recent memory chip prices remain supported by tight supply, and multiple institutions believe the industry shortage may persist. Citi analyst Peter Lee predicts that this round of memory chip supercycle may last nine years; Macquarie believes the current market is closer to structural shortage rather than impending supply excess.

However, the market has already begun to trade the next downward cycle in advance, showing a noticeable increase in sensitivity to new capacity and capital expenditures from large tech companies. Long-term supply agreements can enhance order visibility, but cannot completely eliminate the cyclical risks brought by a slowdown in AI infrastructure investment, rising financing costs, and the concentration of new capacity releases in the future.

Last week, SK Hynix also suspended the plan for its subsidiary Solidigm to go public in the U.S., citing increased volatility in financial markets. This plan had previously drawn attention from investors and regulators due to potential impacts on equity structure and valuation.

In this environment, Tuesday's post-market financial report needs to answer three questions: Can HBM and DRAM orders maintain their current strength, how will the company arrange new capacity in a tight supply period, and what scale and execution method will the new shareholder return ultimately take.

Tuesday's rebound in Asian chip stocks has already reflected some optimistic expectations, while the subsequent trend will depend more on SK Hynix's latest guidance on future demand, order coverage, and capital expenditures.

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