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SK Hynix posted record third-quarter profit on AI memory demand and expects shortages to last through 2030. To keep up, it plans to spend significantly more on factories next year. That helps chip equipment makers Lam Research and Applied Materials, which sell the tools those factories need.
Source: MarketWatch ↗
When a chipmaker is sold out for years, it spends on new factories, and the companies that make factory equipment get the orders.
SK Hynix reported record results on October 27. Revenue passed 100 trillion won in the third quarter for the first time, and operating margin reached 80%. The company expects demand to exceed supply through 2030. That supports rival memory maker Micron Technology (MU), which sells into the same tight market. Buyers such as Nvidia (NVDA) and server maker Dell Technologies (DELL) face higher memory prices. To close the gap, SK Hynix plans to raise investment significantly next year. Yongin Phase 1 enters full operation, and it is converting more than half of its domestic NAND output to 321-layer chips in the fourth quarter. Each of those steps needs new tools from Lam Research (LRCX) and Applied Materials (AMAT). How much of their sales SK Hynix will account for is not yet known.
SK Hynix released its results after the US close on October 27, so the reaction came on October 28. SK Hynix shares closed up 10.89% in Seoul, the Kospi jumped 6.63%, and Micron rose about 4% in US premarket trading. Lam Research had already fallen 8.6% over the prior five trading days, after its own record results on October 21.
Why that may be wrong
Lam fell 8.6% in the five trading days before SK Hynix's results, even after forecasting on October 21 that 2027 chip-equipment spending would top $200 billion, led by DRAM. SK Hynix's plan to raise investment significantly next year is a large customer confirming that forecast. Factory spending turns into toolmaker sales over months, not days. So the effect is likely to show up first in the equipment makers' revenue and memory sales mix, not in their share prices on the day.
SK Hynix says it will adjust the scale and timing of its investment flexibly, so the plan could shrink. The clearest sign would come over the next few months. Look for SK Hynix trimming its 2027 spending plan, or for Applied Materials (results in mid-November) and Lam Research (late January) showing memory's share of their equipment sales stalling, or Lam cutting its outlook of more than $200 billion in 2027 chip-equipment spending. Lam reported memory at 46% of systems revenue last quarter.
Memory has a history of boom and bust. If every maker builds at once, prices could fall and SK Hynix could slow spending, as its own flexible-investment language allows. Equipment makers would then feel the cut quickly. Lam Research and Applied Materials also sell to many customers, so one memory maker's plan may move their results less than it seems.
AI data centers need huge amounts of fast memory, and SK Hynix sells far more than it can make. It has already signed long contracts covering more than half of its output for 2027 and 2028. It also says demand will beat supply until 2030.
When a company is sold out for years, the only way to earn more is to build more capacity. That's why SK Hynix plans to raise factory spending significantly next year, which is called capital spending. It is opening its new Yongin site and upgrading NAND lines to stack 321 layers of storage cells.
A chip factory is an empty shell until it is filled with machines that etch and coat silicon. Lam Research and Applied Materials make those machines, so more SK Hynix factories mean more orders for them. Think of a busy bakery adding ovens, which helps the oven maker most.
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