CNBC’s Jim Cramer said Wednesday. SK Hynix The big gains proved that artificial intelligence stocks can still rise even in a market increasingly skeptical of building large data centers.
The South Korean memory giant’s New York-listed shares rose more than 13% after the company announced better-than-expected results and a positive outlook. The report lifted other chipmakers. micron rose almost 6%, arm 4% progress and AMD 3% increase. The gains stand out as even strong earnings aren’t enough to boost some AI stocks as investors question whether big spending on data centers will pay off.
“SK Hynix held a clinic last night on how to increase its stock price,” the host of “Mad Money” said.
Kramer identified several factors that helped SK Hynix overcome Wall Street’s skepticism, starting with its low valuation. The company’s 2027 earnings are trading at just 4x, reflecting doubts about whether the memory boom will continue. This leaves room for stock prices to rise if earnings beat expectations.
And SK Hynix delivered it. Sales exceeded expectations by approximately 6%, and gross profit margin was 85.7%. The company also expected shipment growth for the current quarter to be in the mid-20s, up from 10% in the third quarter.
“Growth acceleration is like a silver lining for growth investors, allowing them to use their imaginations about how much better things can get,” Kramer said.
Perhaps most importantly, SK Hynix showed that its production is virtually sold out until 2029, backed by long-term contracts with customers. Kramer said the outlook shows how strong demand is for memory chips used in AI data centers.
He highlighted the company’s plans to make significant investments in additional manufacturing equipment. Historically, production expansion has raised concerns about oversupply and falling memory prices. “Hynix recognizes that demand is so strong this time that no more supply will satisfy the market,” Kramer said. “It shows an extraordinary level of confidence.”
The company also outlined significant shareholder returns through dividends and share buybacks, giving investors another reason to be optimistic.
For Kramer, the combination of low valuations, strong earnings, accelerating growth, sustained demand and shareholder returns provided a blueprint for how AI companies could win over investors in a difficult market.
“Once we get past that challenge, I think we’ve got a winner in this market,” he said.
Mr. Kramer said the results also bode well for Micron, which is a holding in the Kramer’s Charitable Trust, a portfolio managed by CNBC’s investment club. He noted that Micron trades at a lower multiple and has similar long-term customer contracts. He also said chipmakers could use increasing amounts of cash for large share buybacks when CHIPS Act funding restrictions are eased on Dec. 9.
