Woofun AI reports that SK Hynix shares plummeted over 10% on July 13, breaking below the 2 million won threshold after a forecast from South Korean brokerage KIS revealed a significant deviation from market expectations. The catalyst was KIS’s projection of Q2 revenue at 80.9 trillion won and operating profit at 60.4 trillion won; while these figures represent robust quarter-on-quarter increases of 54% and 61% respectively, the operating profit estimate fell short of the market consensus of 65 trillion won by approximately 8%. This discrepancy triggered an immediate sell-off, erasing 33% of the stock’s value from its historical high recorded on June 25 within a mere three-week span.

The core friction point identified in the report lies in the structural composition of SK Hynix’s revenue, specifically the disproportionate weight of High Bandwidth Memory (HBM). Although HBM is a premium product, its higher shipment proportion relative to peers resulted in an average selling price (ASP) increase that lagged behind the broader market average. This counterintuitive outcome stems from the pricing mechanisms inherent to different memory segments. While ordinary DRAM and NAND flash memory exhibit high price elasticity in the spot market, allowing for rapid ASP adjustments during upcycles, HBM transactions are predominantly governed by long-term supply agreements (LTA). These contracts lock in fixed prices that do not fluctuate significantly with short-term market conditions, thereby insulating SK Hynix from the full magnitude of the current price surge.

Consequently, SK Hynix captured a smaller share of the "price increase bonus" compared to competitors with lower HBM exposure. During the second quarter, spot market dynamics were exceptionally strong, with KIS predicting a 30% quarter-on-quarter rise in average DRAM prices and a 50% increase for NAND.

However, SK Hynix’s overall ASP growth was constrained by the rigid pricing of its HBM contracts. This structural mismatch meant that despite the soaring costs of conventional memory products, the company’s blended pricing power was diluted by the stable, pre-negotiated rates of its high-volume HBM shipments.

KIS explicitly clarified that the downward revision was not driven by concerns over fundamental performance deterioration but rather by a necessary correction to incorporate signed LTAs into price assumptions. The brokerage adjusted its operating profit forecasts for 2026 and 2027 downward by approximately 9% and 11% respectively, reflecting a more realistic alignment with contractual realities. Despite these near-term adjustments, KIS maintains that the medium-to-long-term trajectory remains positive. The firm anticipates that once HBM4 begins mass shipments in the third quarter, the upward pressure on market average prices will eventually lift SK Hynix’s ASP back to parity with the market average.

Looking further ahead, KIS projects that SK Hynix’s operating profit margin in the second quarter of 2026 will reach 74.6%, a historical high that is expected to continue rising in subsequent quarters. Based on this outlook, the brokerage retains a target price of 3.8 million won and an "overweight" rating. The downgrade is characterized as a short-term disturbance caused by expectation misalignment rather than a shift in the underlying business logic, with the medium-to-long-term upward trend in profitability remaining intact.

Woofun AI data shows that the market reaction underscores a critical disconnect between absolute growth and relative expectations. While a 556% year-on-year increase in operating profit is exceptional in any industry, capital markets prioritize whether results meet priced-in consensus. The 4.6 trillion won gap between KIS’s forecast and the 65 trillion won consensus signaled that prior expectations were excessively optimistic. This triggered dual concerns: immediate disappointment over the shortfall and structural anxiety regarding HBM’s role. Investors now question whether a higher HBM concentration creates a liability during contract lock-in periods, limiting ASP elasticity when spot prices are surging.

Further exacerbating the selling pressure was the timing of SK Hynix’s recent listing on the US stock market last Friday. Some institutional funds, which had positioned for gains associated with new listing volatility, chose to cash out immediately after the American Depositary Receipt (ADR) went public. This liquidity withdrawal compounded the impact of the KIS report, accelerating the decline in share price as both fundamental reassessment and tactical profit-taking converged.

The contagion effect rapidly spread beyond South Korea, impacting global storage sector instruments. In the Hong Kong stock market, the 2x leveraged ETF tracking SK Hynix fell over 22% in a single day, while the 2x leveraged ETF for Samsung Electronics dropped over 13%. The decline also permeated A-share markets, where storage concept stocks such as Zhaoyi Innovation, Beijing Junzheng, Jiangbolong, and Baiwei Storage all fell by more than 7%. This synchronized drop highlights the interconnectedness of global semiconductor valuations and the sensitivity of leveraged products to sentiment shifts.

From a macro perspective, the storage semiconductor sector has entered a distinct adjustment phase over the past half month, with some individual stocks declining by over 20% and approaching technical bear market boundaries. This broader correction is driven by global capital reallocation within the AI ecosystem, characterized by a rotation logic of 'selling chips, buying cloud.' Additionally, a phase rebound in the Hong Kong stock market has attracted capital away from semiconductor equities, further pressuring valuations as investors rebalance portfolios across different asset classes and regions.

Despite the turbulence, KIS argues that the long-term valuation logic for SK Hynix is shifting from quarterly ASP volatility to the sustainability of profitability. As the industry transitions toward 3 to 5-year LTA contract structures, the expansion of these agreements is reducing the historical performance volatility inherent in the storage cycle. With HBM capacity expansion exerting pressure on overall supply, the brokerage expects SK Hynix’s high profitability levels to be maintained in the long term. Valuations are likely to be re-priced based on this stability, with the current target price of 3.8 million won offering significant upside potential, reinforcing the overweight rating.