SK Hynix, Samsung Rally on OpenAI Chip Partnerships

Shares of South Korean tech giants Samsung Electronics (SSNLF) and SK Hynix (HXSCL) experienced a significant boost on Thursday, propelled by their strategic partnership with AI powerhouse OpenAI under the U.S. firm’s ambitious Stargate initiative. The collaboration underscores the escalating demand for advanced memory chips crucial for powering next-generation artificial intelligence applications.

Samsung shares climbed to levels unseen since January 2021, registering a surge of over 4%, while SK Hynix stock soared by more than 9%, marking its highest point since the year 2000. This market reaction reflects investor confidence in the potential of this tripartite alliance to reshape the landscape of AI infrastructure.

In a statement, OpenAI articulated that the partnership will “focus on increasing the supply of advanced memory chips essential for next-generation AI and expanding data center capacity in Korea.” This strategic move addresses a critical bottleneck in AI development – the availability of high-performance memory solutions capable of handling the immense computational demands of cutting-edge AI models.

The ChatGPT creator further emphasized that both South Korean firms are poised to ramp up production of advanced memory chips, which are indispensable for powering its increasingly sophisticated AI models. This commitment signifies OpenAI’s intent to secure a stable and scalable supply chain for its AI ambitions.

The announcement coincided with OpenAI CEO Sam Altman’s visit to Seoul, where he engaged in discussions with South Korean President Lee Jae Myung, as well as top executives from Samsung and SK Hynix. These high-level meetings underscore the strategic importance of the partnership to both the South Korean government and the involved corporations.

Furthermore, OpenAI has reportedly inked a series of agreements to explore the development of next-generation AI data centers in South Korea, involving collaborations with the Korean Ministry of Science and ICT, telecommunications operator SK Telecom, and Samsung subsidiaries. This multi-faceted approach suggests a comprehensive effort to establish South Korea as a pivotal hub for AI infrastructure development.

Earlier this month, SK Hynix revealed its readiness to mass-produce its next-generation high-bandwidth memory (HBM) chips, solidifying its position as a frontrunner in the AI value chain. HBM, a specialized type of memory tailored for AI computing chipsets, is a key component in the offerings of global AI titan Nvidia, a major client of SK Hynix. The company’s progress in HBM technology provides a distinct competitive advantage.

Industry analysts predict that HBM4 chips will be the primary AI memory component required for Nvidia’s upcoming Rubin architecture, a more potent AI chip designed for global data centers. The specifications and capabilities of HBM4 are expected to significantly enhance the performance and efficiency of AI workloads.

While SK Hynix has solidified its position as a primary chip supplier to Nvidia, Samsung has reportedly been actively pursuing certification of its HBM4 chips by Nvidia. Achieving this certification would be a major step for Samsung in reclaiming market share in the HBM space.

Historically, Samsung has dominated the memory market, but SK Hynix’s recent advancements in HBM technology have posed a significant challenge to its leadership. A recent report by Counterpoint Research highlighted that SK Hynix had matched Samsung’s memory revenues in the second quarter, setting the stage for a tight race for the top position in the global memory market. The HBM market is demonstrating its increasingly crucial role in determining the leaders of the overall memory space.

Samsung’s second-quarter earnings fell short of expectations, with profits from its chip business plummeting by nearly 94% year-on-year. However, the company anticipates a rebound in the second half of the year, driven by the increasing demand for advanced memory solutions spurred by the growth of AI.