Article by Edward Sheldon
The SK Hynix Bear Case: Are Investors Ignoring the Risks?
July 14, 2026 | Research Insights
SK Hynix stock is seeing a huge amount of interest from investors at present. It’s easy to see why – the company is enjoying prolific growth thanks to its dominance in the booming High-Bandwidth Memory (HBM) market and after a recent Nasdaq ADR listing the stock is more accessible than ever. But are investors ignoring the risks here? Let’s take a look at the bear case for the South Korean chip stock.
Memory has Historically Been Very Cyclical
Today, the backdrop for SK Hynix is favorable. With generative AI driving unprecedented demand for memory chips, the company is posting strong revenue growth.
In the first quarter of 2026, for example, revenue amounted to KRW 52,576 billion1 (approx. USD $35 billion). This represented an increase of almost 200% year-over-year.
The thing is, the memory market has historically been extremely cyclical. So, while demand is currently sky-high, there is no guarantee that this setup will persist.
Looking ahead, we could see hyperscaler spending on AI infrastructure moderate. Alternatively, we could see generative AI systems become more efficient and require less memory.
If either of these scenarios were to play out, SK Hynix’s growth could slow. This could result in a fundamental de-rating of the chip stock.
Pricing Power May Not Last
Looking beyond the high level of demand, pricing power is also a key revenue driver for the company at present. As a result of the global shortage of memory chips, it has been able to increase its prices significantly.
These higher prices may not last, however. If supply begins to catch up with demand, it’s highly likely that prices will fall.
It’s worth noting that following a period of strong demand for memory in 2021 and the first half of 2022, prices in this area of the chip market decreased meaningfully in the third quarter of 2022 as a result of weakening demand and general oversupply in the market. As a result, SK Hynix’s net income for 2022 fell 75% year-over-year to KRW 2,439 billion2.
This drop in prices and downturn in profitability led to weakness for the stock. After rising above KRW 100,000 early in the second half of 2022, the stock ended the year near KRW 75,0003.
Increased Competition Could Impact Growth
Another scenario that could potentially impact SK Hynix’s growth is increased competition. With memory chip companies enjoying huge profit margins at the moment amid supply bottlenecks (SK Hynix had an operating margin of 72% in the first quarter of 20261), other tech companies are inevitably likely to claw their way into the market.
Increased competition in the HBM space is also a major risk. While SK Hynix has a near-60% market share here4, both Samsung and Micron are aggressively targeting market share.
Zooming in on Samsung, it has successfully bypassed early yield setbacks, generating over $1 billion in HBM4 sales within months of launch5. It’s leveraging its vertically integrated manufacturing model – handling design, fabrication, and packaging in-house – to target slots in Nvidia's Vera Rubin platform and AMD's Instinct accelerators, with the goal of tripling its total HBM sales and capturing market share from SK Hynix.
As for Micron, it has evolved into a formidable challenger, having sold out its entire HBM production capacity through 2026 and even well into 2027 by locking in massive Supply Capital Agreements (SCAs). A central pillar of Micron’s strength is its direct partnership with Nvidia; it has already entered high-volume production of its advanced 36GB 12-Hi HBM4 chips6, which are specifically tailored for Nvidia's Vera Rubin GPU architecture.
The Nvidia Partnership is a Risk
Customer concentration is a risk factor too. In recent years, a large chunk of the company’s sales have come from Nvidia.
If Nvidia was to see reduced demand for its GPUs, slow its next-gen chip rollout, or switch to cheaper HBM suppliers, SK Hynix could be badly impacted. Note that Nvidia sales have an outsized effect on SK Hynix's net profitability due to the vastly superior margins of HBM compared to legacy PC and mobile DRAM.
The Stock has Gone Parabolic
Finally, it’s worth highlighting the fact that SK Hynix’s stock price has experienced a parabolic rise. While it has lost some momentum recently, it is still up more than 600%3 over the last 12 months and trading well above its 200-day moving average.
After that kind of rise, there is always the chance of significant profit taking at some point. This could come on the back of weaker-than-expected earnings, a projected slowdown in AI capex spending, higher interest rates, general market weakness, or other scenarios.
Minimal Room for Error
In summary, while SK Hynix remains a titan of the AI boom, there are many risks to the investment case. Not only are there risks around demand and pricing power but there are also risks around competition and customer concentration. Ultimately, investors buying at these parabolic heights should look past today's powerful top-line growth and record-breaking margins and ask a fundamental question: are they buying into permanent structural growth, or is this just a short-term boom in a highly cyclical market? Because after a 600%+ rise in the stock price over the last year, there is minimal room for error.
Footnotes:
1SK Hynix, SK hynix Announces 1Q26 Financial Results, as of April 22, 2026
2PR Newswire, SK hynix Reports 2022 and Fourth Quarter Financial Results, as of January 31, 2023
3Google Finance, as of July 9, 2026
4Counterpoint Research, Global DRAM and HBM Market Share: Quarterly, as of June 9, 2026
5The Chosun Daily, Samsung Electronics Surpasses $1 Billion in HBM4 Sales, Market Share Recovery, as of June 23, 2026
6Micron, Micron in High-Volume Production of HBM4 Designed for NVIDIA Vera Rubin, PCIe Gen6 SSD and SOCAMM2, as of March 16, 2026
Author is a contractor of Leverage Shares LLC, a U.S. affiliate of Themes Management Company LLC. Leverage Shares LLC provides certain services to Themes under an intercompany services agreement.
