Just as global investors are hesitating over the outlook for the memory chip sector, Swiss banking giant UBS is making a bold call to buy South Korean memory leader SK Hynix. Even though the company’s stock has plunged roughly 8% over the past five trading sessions, UBS raised its target price from ₩3 million to ₩3.2 million (approximately $2,091) in its latest report, reiterating a Buy rating and explicitly identifying three catalysts poised to trigger a new wave of revaluation.

In a research report released on Friday (the 3rd), UBS noted that the AI-driven memory storage super-cycle is accelerating, and SK Hynix, as a core leader in this arena, continues to benefit from tightening supply-demand dynamics and generational technology shifts. Market sources indicate that despite the recent significant pullback in the stock price, this decline is merely a transient phenomenon. The subsequent formalization of long-term supply agreements, the mass production and shipment of HBM4, and a potential share buyback program following the listing of American Depositary Receipts (ADRs) will collectively drive a re-rating of the company’s valuation.

On the earnings outlook, UBS’s figures far exceed the general market consensus. The report estimates that SK Hynix’s 2026 operating profit will reach ₩32.7 trillion (approximately $21.4 billion), about 27% higher than the market consensus. For 2027, the figure is projected to reach ₩62.3 trillion (approximately $40.7 billion), exceeding consensus by about 54%.

The valuation also signals significant undervaluation. At the current stock price, the company’s price-to-book (P/B) ratio for 2027 is just 2.76 times, implying a long-term return on equity (ROE) of about 31.7%, which is notably lower than UBS’s forecast of 41.9%. This suggests the market has yet to fully reflect the structural leap in SK Hynix’s profitability. Even though the company’s stock has surged over 258% year-to-date, UBS believes there is ample room for valuation recovery.

Three Catalysts Supporting a Long-Term Bullish Outlook

The three short-term trading catalysts identified by UBS form the core logic behind this target price upgrade.

Long-Term Supply Agreements Lock in 60-70% of Shipments

First, SK Hynix is accelerating the advancement of revised Long-Term Agreements (LTAs) with hyperscale cloud service providers, covering products including DDR5 and NAND Flash. These new contracts reportedly span over five years and lock in approximately 60% to 70% of planned shipment volumes and pricing. This move will effectively enhance the company’s future earnings visibility and help mitigate the suppressive effect of the memory industry’s cyclical volatility on its valuation.

HBM4 Enters Critical Mass Production Phase, Tapping into NVIDIA’s Rubin Platform

Second, the technology race in High Bandwidth Memory (HBM) has entered a white-hot stage. The UBS report indicates that SK Hynix has largely completed the final design tweaks for HBM4 and expects to commence large-scale shipments for NVIDIA’s Rubin platform in the second quarter of 2026. This not only marks the official commercialization of next-generation AI memory but will also significantly boost the company’s revenue.

Although rival Samsung may slightly lead in HBM bit market share by 2027, with 41% versus 39%, SK Hynix possesses a long-term structural advantage in the proportion of HBM revenue within its DRAM business. UBS forecasts show this proportion will surge from 15% in 2026 to 58% in 2030, indicating that high-value-added products will become the mainstay of the company’s future operations.

Share Buybacks Anticipated After ADR Listing

Third, the narrative of shareholder returns is gradually strengthening. As the ADR listing plan progresses, a share buyback program is expected to be initiated and gradually scaled up. The market’s focus has shifted from mere stock price appreciation to whether the current valuation fully reflects higher profit margins, improved free cash flow, and a continuously enhanced capacity for shareholder returns.

Strong Outlook for Memory Contract Prices in the Second Half

UBS holds a highly positive outlook for memory chip contract prices in the second half of 2026. Considering the impact of long-term agreements and HBM products, the bank predicts that SK Hynix’s DRAM average selling price (ASP) will achieve a quarter-over-quarter increase of 43% in Q2 2026. Excluding the impact of long-term agreements, the quarter-over-quarter increase for the DDR blended ASP would be as high as 67%.

Below are UBS’s forecasts for SK Hynix’s memory ASP in the second half of 2026:

Product CategoryQ2 2026 QoQ GrowthQ3 2026 QoQ GrowthQ4 2026 QoQ GrowthDRAM Blended ASP43%21%13%DDR Blended ASP (excl. LTA impact)67%–NAND Flash Blended ASP43%25%10%

Note: The above forecasts are estimates from UBS’s financial model based on specific conditions.

For NAND flash memory, UBS expects the blended ASP to increase by 43%, 25%, and 10% quarter-over-quarter in Q2, Q3, and Q4 of 2026, respectively. The report specifically highlights that the rise of Agentic AI is significantly driving memory demand from multiple dimensions, including demand for DDR5 and LPDDR5 from AI servers, KV cache expansion, and increased procurement of storage NAND.

In terms of total demand, UBS predicts that DRAM bit end-consumption will grow by 36% year-over-year in 2027, up from 22% in 2026. The growth rate for NAND bit end-consumption is also expected to accelerate further from 20%.

Institutional investors note that SK Hynix possesses extremely high technological barriers and customer stickiness in the HBM field. Especially given its deep ties with NVIDIA, its initial supply of HBM4 faces virtually no competitors. With long-term agreements locking in most of its production capacity, the volatility of its financial data in the coming quarters will be significantly reduced, helping the market assign it a higher valuation multiple.