Bank of America backs SK Hynix (SKHY.US): Storage supercycle momentum remains strong, shareholder returns aim for 100 trillion Korean won

According to Jinse Finance APP, Bank of America has maintained a "Buy" rating on South Korean memory chip giant SK Hynix (SKHY.US), with a target price of $250. Bank of America highlighted several investment points, including memory supply shortages, an increase in long-term agreements (LTA), and high profit margins.

The analyst team at Bank of America, led by Simon Woo, pointed out that the phenomenon of "downgrading"—meaning a reduction in memory content per device or GPU/CPU—is currently occurring mainly in PCs, smartphones, and low-end GPU/ASIC sectors. Bank of America emphasized that this reflects memory chip supply shortages, rather than a decline in end-user demand. For high-end applications, including next-generation GPUs, relevant manufacturers will continue to adopt high memory content configurations without downgrading. Although some new wafer fabs are under construction, cleanroom space remains tight, and both DRAM and NAND wafer capacity expansion are constrained. Considering these factors, Bank of America concludes that memory supply will remain tight even in the long term.

On the business model front, Bank of America pointed out that with the continuous increase in long-term agreements (LTA), the average selling price (ASP) of memory chips is likely to stabilize, moving away from the significant volatility seen in the past.

In terms of shareholder returns, SK Hynix reiterated its policy of a shareholder return ratio exceeding 50%, which includes a recently announced share buyback program worth 40 trillion won. Bank of America expects that, aside from this buyback, SK Hynix will also pay out approximately 30 trillion won in dividends based on 2026 performance, with the ratio of dividends to buybacks being around 40:60.

The Woo team stated, "We believe the remaining distributable free cash flow (FCF) is expected to be paid in a combination of dividends and buybacks in April 2027, after the annual shareholders’ meeting in March 2027. With the memory chip supercycle driving both ASP and unit sales growth, SK Hynix's free cash flow in 2027 is expected to exceed 200 trillion won. This will support a total shareholder return of more than 100 trillion won for the company in 2027."

After the US stock market closed on Wednesday, NVIDIA's strong revenue guidance boosted chip stocks, with SK Hynix ADR rising 5% in after-hours trading to $165.92. Earlier, there was news that Samsung Electronics and SK Hynix plan to increase their supply of 8-layer HBM4 memory to NVIDIA in the second half of this year.

On Thursday morning, South Korea's Kospi index rose as much as 2.8%, with SK Hynix’s Korean shares up 3.7%.