SK Hynix posts narrower second-quarter loss amid robust AI demand, sees chip recovery

South Korean chipmaker SK Hynix posted a second-quarter operating loss of 2.88 trillion Korean won ($2.24 billion) connected Wednesday arsenic request for representation chips remained sluggish.

SK Hynix said the anemic representation spot marketplace is connected the roadworthy to betterment amid robust artificial quality demand, which resulted successful a smaller second-quarter operating loss.

The quarterly losses were narrower than the 3.4 trillion Korean won successful the erstwhile 4th which ended successful March, and compared to a 4.2 trillion won nett from a twelvemonth ago.

That's compared with expectations for a 2.7 trillion won operating loss, according to Refinitiv estimates, weighted toward analysts that are much consistently accurate.

Memory chips are important to bid large-language models specified arsenic ChatGPT. Such chips alteration generative AI models to retrieve details from past conversations and idiosyncratic preferences successful bid to make humanlike response.

"Amid an enlargement successful generative AI market, which has mostly been centered connected ChatGPT, request for AI server representation has accrued rapidly," the institution said successful its net study connected Wednesday.

"In the future, the AI related semiconductors oregon the DRAMs, are going to person a large impact," Anthony Sassine, elder concern strategist astatine KraneShares told CNBC Wednesday. "These are expected to turn betwixt 35% to 40%. We're going to spot a batch of request from that and that's astir apt underestimated."

"I deliberation ChatGPT and generative AI this twelvemonth benignant of opened my eyes to and made that realization happened sooner than expected. And present we're trying to play drawback up and I deliberation SK Hynix volition payment from that," said Sassine.

Shares of SK Hynix were trading 1.23% little connected Wednesday greeting successful Asia.

Revenue accrued successful the 2nd 4th to 7.31 trillion Korean won, up 44% from the archetypal 4th of 5.08 trillion Korean won.

As a result, income of premium products specified arsenic HBM3 and DDR5 increased, the institution said.

"Having passed the trough successful the archetypal quarter, the representation semiconductor marketplace is seen to person entered the betterment phase," said Kim Woohyun, vice president and CFO of SK Hynix, successful the net report.

SK Hynix is the world's 2nd largest shaper of dynamic random-access memory chips aft Samsung Electronics. DRAM chips are recovered successful user devices specified arsenic smartphones and idiosyncratic computers.

SK Hynix said successful October it volition beryllium cutting its superior expenditure by fractional successful 2023 to little accumulation aft posting a 60% diminution successful third-quarter nett from anemic representation spot demand. Samsung and Micron person besides announced superior expenditure cuts to little production.

Smartphone and PC makers are struggling with excess inventories of representation chips aft stockpiling specified chips during the pandemic-induced boom. As ostentation soared, consumers person been buying little of these goods owed to rising inflation, prices for representation chips person fallen.

The institution said income of some DRAM and NAND flash representation products accrued successful the 2nd quarter, and higher mean selling terms of DRAM mostly contributed to gross growth.

"Although the terms for wide DRAM products specified arsenic DDR4 continued to diminution connected sluggish PC and smartphone demands, DRAM blended mean selling terms roseate successful the quarter, offset by accrued income successful high-end products utilized for AI servers," the institution said.

The South Korean memory chip maker expects the request for AI representation to "continue to enactment robust" and a "clearer effect of accumulation simplification by representation companies" is expected.

"The company's stance connected consolidated investment, which is to trim that by astatine slightest 50% compared to 2022, remains unchanged," said Kim.

Sassine said helium expects representation spot prices to spell up this year.

"So we've had declining prices for DRAM and NAND for past twelvemonth and fractional [of this year], and that inventory is expected to bottommost out. We should commencement seeing these prices spell up successful astir apt successful Q3 oregon Q4, and that should assistance SK Hynix's large concern arsenic of now," said Sassine connected CNBC's "Squawk Box Asia" Wednesday.

SK Hynix volition payment from the AI boom, said Sassine.