Bank of America has reaffirmed its "Buy" rating on South Korean memory chip giant SK hynix (SKHY.US), setting a price target of $250. The firm highlighted several key investment drivers, including memory supply shortages, an increase in long-term agreements (LTAs), and robust profit margins. The analyst team, led by Simon Woo, noted that the so-called "down-scaling" phenomenon—where memory content per device or GPU/CPU declines—is currently confined primarily to PCs, smartphones, and low-end GPU/ASIC segments. BofA emphasized this reflects memory supply constraints rather than weakening end-user demand. For high-end applications, including next-generation GPUs, manufacturers will continue to adopt higher memory content configurations without any down-scaling.

Although some new wafer fabs are under construction, cleanroom space remains tight, limiting both DRAM and NAND wafer capacity expansion. Weighing these factors, BofA concluded that memory supply will likely remain tight even over the long term. On the business model front, the bank pointed out that as LTAs increasingly expand, average selling prices (ASPs) for memory chips are expected to stabilize, moving away from the historically sharp volatility. Regarding shareholder returns, SK hynix has reiterated its policy of returning over 50% of shareholder returns, which includes the recently announced 40 trillion KRW share buyback program. BofA projects that, in addition to this buyback, SK hynix will pay out approximately 30 trillion KRW in dividends tied to 2026 performance, with a dividend-to-buyback ratio of roughly 40:60.

Woo's team stated: "We believe the remaining payable free cash flow (FCF) is likely to be distributed in April 2027, following the March 2027 annual general meeting, through a mix of dividends and buybacks. As the memory supercycle drives both ASP and volume growth, SK hynix's FCF for 2027 is expected to exceed 200 trillion KRW. This will support total shareholder returns surpassing 100 trillion KRW in 2027."

On Wednesday after the U.S. market close, strong revenue guidance from Nvidia lifted chip stocks, with SK hynix's ADR climbing 5% in after-hours trading to $165.92. Earlier reports indicated that Samsung Electronics and SK hynix plan to boost supply of 8-layer HBM4 memory to Nvidia in the second half of this year. On Thursday morning, South Korea's Kospi index rose as much as 2.8%, while SK hynix's Korean-listed shares advanced 3.7%.