SK hynix Inc. (NASDAQ:SKHY) is the talk of the AI memory trade right now. Investors are staring at record profitability, tight supply and long-term demand on one side, and valuation, competition and the possibility of a more normalized memory cycle on the other. It is a lot to weigh before lunch.

The Numbers Are, Frankly, Absurd

On Tuesday, SK hynix reported a record operating profit of 83.33 trillion won ($62.55 billion). That is up 632% year over year and blew past analysts' estimates of 76.7 trillion won. Revenue surged 328% to 104.62 trillion won ($78.52 billion), while its operating margin widened to 80%. Yes, 80%. That is not a typo, and it is not a number you see every day outside of, say, a very good software company or a monopoly.

The company said higher memory prices and AI server demand drove the quarter. It has signed long-term agreements with 14 major customers, including global cloud providers, covering more than 50% of total production capacity for 2027 and 2028. That is a lot of visibility for a business that historically has been about as predictable as a coin flip.

SK hynix expects demand to continue exceeding supply through 2030. For the fourth quarter, it guided to mid-20% DRAM growth from the prior quarter and mid-single-digit NAND growth. For 2027, it expects DRAM demand to rise in the mid-20% range and NAND demand in the high teens. The company also plans to increase capital spending significantly from 2026 levels and return about KRW 100 trillion ($75 billion) to shareholders this year through dividends and buybacks.

One Analyst Says The Stock Is 'Ridiculously Cheap'

Futurum CEO Daniel Newman said the results reinforced his view that the AI memory cycle could last much longer than previous cycles. He told CNBC on Wednesday that SK hynix signaled demand may remain stronger than supply through the end of the decade, while some customers are seeking to extend long-term agreements from three-to-five-year terms toward as long as a decade.

Those demand signals, he argued, make SK hynix look "ridiculously cheap" at roughly three to four times forward earnings. That is the kind of multiple that usually implies the market expects the business to fall off a cliff at some point. Newman does not think it will.

He also said memory suppliers currently hold more pricing power than they historically did because AI demand is constraining DRAM and HBM supply. He sees Chinese DRAM capacity as a potential source of additional supply, but said Chinese producers remain years away from offering competitive HBM products for advanced AI inference. So the moat, for now, is real.

Another Analyst Says Thanks, But I'll Take Micron Or Samsung

Susquehanna analyst Mehdi Hosseini maintained a Neutral rating despite the stronger-than-expected quarter. He told CNBC on Wednesday that gross and operating margins came in slightly above his forecasts and expects memory to remain in a favorable position as AI workloads shift from training toward inference.

He believes memory and networking will add increasing value to AI systems and does not expect a significant margin decline over the next few years, although some normalization remains possible. That is analyst-speak for "things are good, but let's not get carried away."

Here is the interesting part: Hosseini prefers Micron Technology Inc. (NASDAQ:MU) and Samsung Electronics Co. (OTC:SSNLF) on a relative basis because of their broader product portfolios. He also agreed that SK hynix appears undervalued and highlighted its 45% free-cash-flow margin, while preferring its U.S. ADRs over the Korean-listed shares because of the larger U.S. investor pool.

So even the neutral analyst thinks the stock is cheap. He just likes the diversification of the other two memory giants a bit more. That is not exactly a bearish take, but it is a reminder that in a boom this big, there is more than one way to play it.

SKHY Price Action: SK hynix shares were up 8.13% at $157.18 during premarket trading on Wednesday, according to market data.