Missed Nvidia in 2009? This Rare Signal Is Flashing Again.\u00a0In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia.\u00a0For the first time in years, that same “Total Conviction” signal is flashing for a company 1\/100th the size of Nvidia.\u00a0Continue \u00bb<\/a> <\/p>\n A forward multiple that low is usually the market’s way of saying earnings are about to peak. So, is the market right this time? I’m not so sure it is. <\/p>\n The memory maker’s second quarter, reported at the end of July, was extraordinary. Revenue came in at 79.3 trillion Korean won (about $55 billion), up 257% year over year, and operating profit soared 557% to 60.5 trillion won (about $42 billion). <\/p>\n The trajectory is steep even quarter to quarter. Compared with the first quarter, revenue grew 51% and operating profit climbed 61%. The company’s operating margin widened to 76%, up from about 72% a quarter earlier and about 41% a year before that. And first-half revenue crossed 100 trillion won for the first time in the company’s history. <\/p>\n Memory prices are still moving up, too: The company said both DRAM and NAND flash prices rose from the first quarter, with high-value products like HBM and DRAM for AI servers leading the increases. <\/p>\n Some of the growth is contracted, not just hoped for. SK Hynix said it has finalized long-term agreements with about 10 customers. And it began mass shipments of HBM4, its newest product generation, in the second quarter, with production ramping in the second half. Sample shipments of the following generation, HBM4E, went out during the first half. <\/p>\n The NAND side of the business is moving upmarket. The company’s newest 321-layer chips already account for the largest share of its NAND production, and it’s targeting about half of its domestic capacity by the end of the year. <\/p>\n The company also counts Nvidia as a key customer. And in late July, Nvidia<\/a> and SK Hynix’s parent, SK Group, announced a partnership worth more than $500 billion, with a long-term AI memory supply agreement for SK Hynix inside it. <\/p>\n Story Continues <\/p>\n What a multiple under 4 is pricing in <\/p>\n SK Hynix carries a market value of about $805 billion. Divide that by less than 4, and analysts’ estimates imply somewhere around $210 billion of net income next year — roughly double what the company earned over the past 12 months. <\/p>\n In other words, the market believes next year will be enormous and still won’t pay up for it. That is how investors treat a cyclical business at what they suspect is the top of its cycle. <\/p>\n The suspicion isn’t baseless. Memory has been a boom-and-bust industry for decades, and the busts can be ugly. <\/p>\n Supply is rising, too. SK Hynix itself plans capital expenditures in the high 40 trillion won range this year (more than $32 billion), and rival Samsung Electronics began shipping its first HBM4 chips earlier this year. Rising supply is exactly how past memory booms have ended. <\/p>\n To be fair, this cycle has features the old ones lacked. The long-term agreements commit customers to capacity years out, and HBM sells into an AI build-out that keeps getting bigger. The company also holds a net cash position of 69.4 trillion won (about $48 billion), so it could spend through a downturn without strain. <\/p>\n Still, a 76% operating margin invites competition and new capacity. Investors probably shouldn’t count on profitability like that persisting deep into the decade, and I don’t. <\/p>\n The stock doesn’t need it to persist, though. At less than 4 times the earnings analysts expect next year, even a steep profit decline in 2028 and beyond could leave the stock looking reasonably priced in hindsight. But if those estimates start falling instead, the stock may fall hard with them. With memory, that risk is never small. <\/p>\n So, this is one I’d actually consider buying. Ultimately, I think the market’s pessimism about the cycle is overdone, given how much of the demand is now under long-term contract. I’d buy in moderation, though, and go in expecting the rough stretch that every memory cycle eventually brings. <\/p>\n Should you buy stock in SK Hynix right now? <\/p>\n Before you buy stock in SK Hynix, consider this: <\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/a> for investors to buy now\u2026 and SK Hynix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. <\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $396,758!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,300,820!* <\/p>\n Now, it’s worth noting\u00a0Stock Advisor’s total average return is 939% \u2014 a market-crushing outperformance compared to 211% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built by individual investors for individual investors. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of August 6, 2026. <\/p>\n Daniel Sparks<\/a> and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Image source: Getty Images. The earnings the market doubts <\/p>\n