On July 28, 2026 (Beijing time), SK Hynix (000660.KS) plunged to 1,555,000 KRW during intraday trading, marking a single-day drop of 14.37%. This not only set the company’s largest one-day decline in recent years but also triggered the eighth circuit breaker of the year for South Korea’s KOSPI index. As a core supplier of high-bandwidth memory (HBM) for NVIDIA, SK Hynix had been one of the most sought-after stocks in the current AI boom—its share price nearly doubled from the start of the year to its June peak, and its market cap briefly surpassed Samsung Electronics to top the Korean stock market. Yet in just over a month, its share price has pulled back about 38% from its high, wiping out approximately $470 billion in market value.
With the Q2 earnings report looming, is this crash merely a short-term emotional selloff, or does it signal a turning point in the AI memory supercycle? This article will break down the structural logic behind this wave of selling from three perspectives: doubts over AI investment returns, intensifying competition from China, and the unwinding of a valuation bubble.
Flashpoint: NVIDIA’s "Backstop" and a Market Sentiment Reversal
The immediate trigger for this plunge came from an overnight selloff in the US semiconductor sector. According to The Wall Street Journal, NVIDIA is in talks with OpenAI to provide about $250 billion in financing guarantees, helping OpenAI lease a 10-gigawatt data center campus developed by SoftBank in Ohio.
This news sparked significant unease among Wall Street traders. The core concern isn’t a lack of AI demand, but whether AI infrastructure investment has entered an overexpansion phase. NVIDIA, once seen as a pure beneficiary of AI chips, is now being repriced by the market as an "implicit guarantor" across the AI industry chain—not only selling chips, but also shouldering financial risk for downstream clients’ capital expenditures. NVIDIA’s credit default swap (CDS) spread surged 14 basis points in a single day, its stock price tumbled 5%, and about $250 billion in market value evaporated.
This shift in perception quickly spilled over to SK Hynix. As a key supplier of NVIDIA’s HBM chips, SK Hynix’s valuation has long been based on the chain: "AI compute demand explosion → GPU shipment growth → HBM supply shortage." But as the market begins to question the sustainability of capital spending at the end of this chain—AI data centers—the entire valuation framework loses its foundational support.
Reason 1: The Commercialization Cycle of AI Capex Faces a Test
Previous Market Logic
AI demand grows → Data center expansion → Increased GPU demand → HBM demand surges → SK Hynix benefits
This logic was fully validated and priced in by the market from 2025 through the first half of 2026. SK Hynix’s Q2 earnings outlook remains strong: consensus estimates call for revenue of 84.06 trillion KRW and operating profit of 64.09 trillion KRW, a year-over-year increase of nearly 600%, potentially setting a new record.
Current Market Concerns
AI capex rises → Massive investment scale → Uncertain commercialization cycle → Are chip orders sustainable?
The core issue: Can massive capital expenditures be converted into sustainable commercial returns? NVIDIA’s $250 billion financing guarantee for OpenAI has been interpreted by some institutions as a "watershed moment marking the peak of the AI financing frenzy." If the world’s largest AI chipmaker needs to guarantee financing for the largest AI model company just to absorb compute capacity, then the industry’s ability to generate its own cash flow deserves re-examination.
Analysts note that despite Samsung Electronics and Alphabet both reporting blowout earnings recently, semiconductor stocks still sold off sharply after their reports. This anomaly suggests that the market is placing less weight on "good results" and increasingly focusing on "future demand sustainability."
Additionally, the proliferation of low-cost, open-source AI models in China (such as Kimi K3) has prompted the market to reassess the intensity of compute demand. If future AI workloads consume less compute than previously expected, demand for advanced AI chips and HBM could also decline.
Reason 2: China’s Storage Competition Is Catching Up Faster Than Expected
CXMT’s Accelerated Expansion
China’s largest DRAM manufacturer, ChangXin Memory Technologies (CXMT), is becoming an increasingly important player in the global memory market. According to SemiAnalysis, CXMT now holds about 10% of the DRAM market. In Q1 2026, CXMT’s global DRAM market share (by revenue) reached 8%, up 5 percentage points year over year.
In the HBM sector, CXMT is moving even more aggressively. Industry sources indicate that CXMT plans to achieve full-scale HBM3 production in 2026 and begin mass production of HBM3E in 2027, with related capacity expected to reach 100,000 wafers per month by 2028. While analysts believe CXMT still lags the leading players by 3–4 years in HBM technology, the gap is closing faster than the market anticipated.
Turning Point in Market Sentiment
On July 27, ChangXin Technology completed its IPO on China’s A-share market. This event, combined with reports that Chinese companies are independently developing deep ultraviolet (DUV) lithography equipment, reignited concerns about the rapid capacity expansion of Chinese memory makers.
At the same time, reports have surfaced that Apple has begun lobbying the US government to allow some products to use China-made chips. If this trend continues, Chinese memory manufacturers will further strengthen their position in the global supply chain, intensifying competitive pressure on traditional leaders like SK Hynix.
Korean media outlet BusinessKorea points out that CXMT’s ongoing capacity expansion and HBM R&D investment are putting increasing pressure on the "big three" memory giants—Samsung, SK Hynix, and Micron. While SK Hynix’s dominance in high-end HBM is unlikely to be challenged in the short term, the market is already pricing in a new competitive landscape for the post-2027 era.
Reason 3: Structural Profit-Taking from Overvalued Trades
Prior Rally and Valuation Bubble
Before this plunge, SK Hynix was one of the world’s hottest AI stocks in 2026. Its share price nearly doubled from the start of the year to its June peak, and its forward P/E ratio soared to nearly 10x. The rally was fueled by: rising overall AI valuations, order expectations driven by HBM scarcity, and the "moat" narrative of being a key NVIDIA supplier.
Cracks in the Valuation Logic
However, as the market began to reassess these factors, profit-taking became inevitable.
The first crack comes from the "double-edged sword" of long-term agreements. SK Hynix’s multi-billion-dollar long-term supply deal with NVIDIA was seen by retail investors as a guarantee of future orders, but institutional investors took a very different view: while the agreement locks in shipments for years, it also caps profit flexibility. If HBM spot prices rise, the company can’t capture spot premiums due to contract constraints; if the industry cycle turns down, contract prices are slow to adjust. The agreement’s cap on upside is a key reason institutions have downgraded their long-term price forecasts.
The second crack stems from the cyclical nature of the memory industry. Short sellers argue that memory is a classic cyclical sector, and low valuations at the peak of the cycle are often a "value trap." Today’s super-high profits are the result of a temporary HBM supply squeeze—a short-lived windfall, not a sustainable trend. Once supply loosens after 2027, low valuations based on peak earnings could quickly become obsolete.
Evidence from Capital Flows
Options market positioning clearly reflects the shift in sentiment. For options expiring the week of July 31, put open interest totaled 108,579 contracts, while call open interest was just 19,324, for a put/call ratio of 5.62—far above the typical "balanced" level of 1.0. The options market is implying a post-earnings move of about 10.9% in either direction. On the eve of earnings, capital is choosing to hedge downside risk with options rather than bet on upside—a telling sign in itself.
Outlook: Earnings Report Becomes a Key Inflection Point
SK Hynix will release its Q2 2026 earnings at 9:00 a.m. Seoul time on July 29. This will be the company’s first earnings report since its Nasdaq listing. The market’s focus is no longer on whether the current results "look good"—record profits are already fully expected—but on management’s answers to three critical questions:
First, is HBM4 mass production progressing as planned? This will determine whether SK Hynix can maintain its lead in next-gen HBM technology.
Second, what are the expansion plans and supply-demand guidance for 2027? This directly impacts the market’s view of a potential "cycle turning point."
Third, is there room to adjust the terms of long-term agreements? This will affect whether profit flexibility can be partially restored.
From a valuation perspective, after the steep selloff, SK Hynix’s forward P/E has dropped to single digits (about 4.4x), below rival Micron’s 6.2x. The tug-of-war between attractive static valuations and industry cycle uncertainty is reaching its most intense stage.
Conclusion
SK Hynix’s 14% single-day plunge cannot be explained by a single bearish factor. It’s the result of a confluence of three forces: overheating concerns in AI investment, accelerating competition from Chinese memory makers, and the unwinding of a valuation bubble. The news that NVIDIA is providing a $250 billion financing guarantee for OpenAI was the final straw for market sentiment—it made investors realize that AI hardware vendors are no longer guaranteed winners, but now must share in the risks of downstream expansion.
In the short term, the Q2 earnings report and management guidance will be a key inflection point for either a rebound or further decline. In the long run, SK Hynix’s technological leadership in HBM remains intact despite the stock plunge, but the market is already repricing its valuation logic—from an "AI scarcity premium" to a "memory cycle mean reversion," a shift that may have only just begun.
FAQ
Q1: What are the main reasons behind SK Hynix’s 14% share price plunge?
A combination of three factors: NVIDIA’s proposed $250 billion financing guarantee for OpenAI raised doubts about the sustainability of AI capital spending; China’s CXMT is accelerating HBM R&D and capacity expansion, fueling competitive concerns; and profit-taking and bubble unwinding after a massive prior rally.
Q2: Has SK Hynix’s fundamental business really deteriorated?
Looking at current performance, Q2 revenue and profits are both likely to hit record highs—fundamentals haven’t worsened. The market’s concern is about the future: whether the temporary HBM supply-demand windfall can last, if long-term agreements have capped profit flexibility, and how quickly Chinese competitors are catching up.
Q3: Can SK Hynix’s share price rebound?
The forward P/E has fallen to about 4.4x, making static valuations attractive. However, a rebound hinges on management’s commentary in the July 29 earnings report regarding HBM4 mass production progress and 2027 supply-demand guidance. If guidance is cautious, another wave of selling could follow.
Q4: How big a threat are Chinese memory makers to SK Hynix?
CXMT now holds about 10% of the DRAM market and plans to mass-produce HBM3 in 2026 and HBM3E in 2027. In the short term, SK Hynix’s lead in high-end HBM remains secure, but the gap is closing faster than expected, and the market is already pricing in a new competitive landscape post-2027.
Q5: What impact does the AI chip selloff have on the crypto market?
AI concept stocks and crypto assets share similar risk-on capital flows, and their correlation is increasing. On July 28, Bitcoin fell below $64,000, Ethereum dropped about 3.6%, and the Fear & Greed Index fell to 30. If the AI sector remains under pressure, the crypto market could face further short-term downside risk.
