# Record profits, big deals — but have Samsung and SK Hynix eased market fears over AI? > Source: > Published: 2026-07-31 04:39:40+00:00 # Record profits, big deals — but have Samsung and SK Hynix eased market fears over AI? Recollections of brutal boom-and-bust cycles are weighing heavily on memory makers’ shares IN a remarkable week, the titans of the near-US$1 trillion global memory industry smashed profit records. It took days before investors stopped selling – a testament to the depth of anxiety in markets about an AI bubble. In the June quarter, Samsung Electronics and SK Hynix – whose revenues make up 80 per cent of the memory sector – generated a staggering 150 trillion won (US$104 billion) in combined operating profit in a single quarter, driven almost entirely by AI’s demand for advanced memory and storage devices. For the full year, SK Hynix alone is [projected to earn more in profits](https://www.businesstimes.com.sg/companies-markets/sk-hynixs-record-profit-misses-forecasts-despite-robust-ai-chip-demand-shares-slump-10) than it has made in the prior 27 years combined. Customers are vying to secure multi-year supply contracts, executives said. Margins surged past advanced chip manufacturing leader TSMC’s. And yet, investors were unimpressed. SK Hynix’s stock tanked almost 30 per cent over three days, while Samsung’s shed about 19 per cent, dragged down further by heavy investor leverage. [Both rallied on Friday (Jul 31)](https://www.businesstimes.com.sg/companies-markets/capital-markets-currencies/sk-hynix-samsung-drive-record-south-korean-rally-lift-asia-stocks-yen-pares-gains) to recoup much of those losses. But they remain more than 30 per cent down from their June peaks. Market participants still want answers to a far bigger question than last quarter’s profitability: Is the pace of AI infrastructure spending sustainable? As the tally of projected capex plans approach the trillion-dollar mark and tech companies’ debt levels rise, recollections of brutal boom-and-bust cycles are weighing heavily on memory makers’ shares. And what of the threat of growing competition from Chinese chipmakers? The rout ended only after Amazon.com addressed some of those fears, reporting that cloud-computing revenue [accelerated for a fifth straight quarter](https://www.businesstimes.com.sg/companies-markets/telcos-media-tech/amazon-beats-cloud-sales-growth-estimates-shares-jump) – which investors took as a sign that some of the spending may be paying off. SK Hynix surged as much as 30 per cent and Samsung gained 26 per cent in Seoul on Friday. SEE ALSO On Thursday, Josh Gilbert, Etoro’s lead analyst for Apac and the Middle East, said, “Samsung has beaten the numbers, but the scepticism may stay. Investors are already looking beyond the current shortage and asking whether aggressive capacity expansion could eventually create the next oversupply cycle.” Officials at Samsung, SK Hynix and US rival Micron Technology disagree, armed with proof in their bottom lines. If anything, the already-severe shortages of memory chips will only get worse in 2027, with little imminent additions to production capacity coming in, they warned. The long-term contracts will keep future cyclical downturns at bay, they said. Memory shortages will persist through 2028, according to Samsung. SK Hynix’s chief has put that timeline beyond 2030. The companies described customers competing to secure future memory supplies. Demand has grown to such a fever pitch, SK Hynix is earmarking at least 45 trillion won in capital spending in 2026, up 50 per cent from a year earlier, while Samsung’s capex is also on pace to exceed 2025’s 52.7 trillion won. While memory prices will eventually moderate, there is no evidence of oversupply, according to Aadil Ebrahim, group head of equities at Klay Group. “Some hyperscalers may rationalise parts of their capital-expenditure plans, but they are not cutting spend on compute,” he said, referring to the likes of Meta Platforms, which on Jul 29 [raised its minimum capex spending for the year to US$130 billion.](https://www.businesstimes.com.sg/companies-markets/metas-zuckerberg-defends-ai-bets-sceptical-investors-amid-disappointing-q3-revenue-forecast) And while the threat of an ascendant China is a legitimate concern, producing leading-edge DRAM – particularly high-bandwidth memory – at scale remains extremely difficult and creates meaningful barriers to entry, he said. ## Long-term deals Some of Samsung’s customers are signing binding long-term memory supply agreements extending for five years, with the option to add additional years during annual negotiations. The contracts also require “substantial” advance payments, executives said. The company has already sealed agreements with the top five global data centre customers and is in the final stages of talks with five more, executives said. Such contracts could easily [make up 60 to 70 per cent of total production capacity, they said.](https://www.businesstimes.com.sg/companies-markets/samsung-posts-over-250-fold-rise-q2-chip-profit-sees-chip-shortage-extending-2028-due-ai-boom) SK Hynix, too, has snagged multi-year deals with around 10 major customers while discussions continue with others, executives said. The agreements, which secure production capacity – rather than fixing prices – are evidence of chipmakers’ enormous pricing power. They suggest memory is beginning to evolve from a commodity into strategic infrastructure that customers reserve years in advance – much like cloud capacity or advanced semiconductor manufacturing. The hope is that such contracts will help memory makers gauge future demand and cushion the blow from any cyclical turbulence ahead. Samsung and SK Hynix’s ability to demand high prices in such contracts is essential to sustain valuations, said Jeremy Tan, chief executive officer of Tiger Fund Management in Singapore. He and other investors are eyeing memory makers’ pricing durability and how much of next year’s output is locked into multiyear contracts at today’s prices. “That’s the difference between a supercycle and an ordinary one,” Etoro’s Gilbert said. ## AI infrastructure changing memory industry model Historically, the memory industry has been notoriously cyclical. Customers often bought on the spot market, inventories swung wildly and suppliers rode repeated cycles of supply-demand imbalance. But AI infrastructure may be changing that model. The proponents of a memory chip supercycle point to the growing role of such chips in AI workflows. Every new generation of Nvidia’s graphics processing units requires ever faster access to more data. As tech providers race to deploy better AI services, securing high-performance memory and storage becomes increasingly critical. “These are amazing numbers,” said Jason Lemire, chief investment officer at Bold Wealth Partners, of SK Hynix’s profit. “The capex supercycle shows no signs of slowing down.” Regarding Samsung, MS Hwang, research director at Counterpoint said, “Samsung is leveraging its strong position in memory to aggressively capture market share across most of its business units.” In the past, the bears have been right, with supply gluts and piles of inventory punishing any global rush by memory makers to build capacity. And so far, Samsung and SK Hynix’s response – record profits, overflowing order books and a growing portfolio of long-term supply agreements – do not seem to be enough to convince investors. Whether the chipmakers can maintain pricing power, secure further long-term agreements and expand enviable margins will remain in focus, said Francis Tan, chief strategist at Indosuez Wealth. “All I want to see is true sustainability,” he said. BLOOMBERG Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free. 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