SK Hynix Rises Over 15% as Citi Says Chinese Memory Makers Won’t Impact Market in Short Term, Memory Tightness to Last Until at Least 2027

TradingKey - On July 30, Eastern Time, SK Hynix ADR ( SKHY) shares staged a violent rebound after breaking below their issue price. As of press time, the stock rose over 15% to $146.39.

It is reported that Daiwa released a research report suggesting that SK Hynix's recent stock price correction was excessive, recommending investors to buy on dips and reiterating its 'Buy' rating. However, in response to valuation downgrades among memory peers, it lowered the target P/E ratio by 20% from 9.38 times to 7.5 times, and cut the 12-month target price from 3.6 million Korean won to 3 million Korean won.

Citi, meanwhile, stated that AI demand will continue to drive up the prices of DRAM and flash memory chips, with supply tightness lasting until at least 2027. Regarding concerns that the capacity surge from Chinese companies would lead to hyper-competition in the DRAM and flash memory markets, Citi also dismissed this view, stating that the two Chinese companies are still technologically constrained by capacity. Although the capacity expansion speed of CXMT and YMTC is similar to that of their global peers, their progress remains concentrated on mature DUV processes.

Citi believes that China lags the rest of the world by more than five years in EUV technology, which limits its ability to materially disrupt the leading memory market.

SK Hynix ADR stock price chart, Source: TradingView

In addition, during a Korean memory experts conference call hosted by Goldman Sachs, participating experts believed that conventional DRAM prices will maintain strong 'double-digit percentage' growth momentum this year. HBM has room for significant price hikes or even doubling next year, the binding power of long-term agreements on the market is strengthening, and Chinese competitors pose limited threats in the short to medium term.

Experts expect that conventional DRAM prices will achieve 'double-digit percentage' quarter-on-quarter growth in the third quarter of 2026, coinciding with the recent strong rebound in spot prices. Entering the fourth quarter, supported by ongoing supply shortages, experts believe that 'achieving another double-digit quarter-on-quarter growth' is also possible. They believe that with no significant volume release on the supply side and continuous demand pull from AI servers, prices are naturally more likely to rise than fall.

The HBM story is even more aggressive. Experts believe that due to rising conventional DRAM prices, HBM pricing 'has the potential to double' next year. Goldman Sachs' own forecast is that Samsung's HBM prices will increase by 87% year-on-year in 2027, a figure already higher than the 52% sell-side consensus compiled by Bloomberg.

On the other hand, the market has been worried about the impact of capacity expansion by Chinese memory manufacturers, but experts remain skeptical. Experts admit that Chinese suppliers are actively expanding capacity, but believe that 'the possibility of them becoming a clear threat to leading manufacturers in the near to medium term is low.' The reason is that there is still a gap between Chinese manufacturers and top players in terms of production yield and technology levels. Simply put, they believe that the scale of capacity expansion does not equate to effective supply, and technical barriers are difficult to overcome in the short term.

Notably, SK Group Chairman Chey Tae-won bought 3,600 shares of SK Hynix. Based on today's closing price of SK Hynix in the South Korean market of approximately $920 (1,322,000 Korean won), the transaction is valued at approximately $3.31 million.