Earnings season begins as Middle East tensions re-escalate

Ipek Ozkardeskaya ipekScope

Last week ended with SK Hynix making history with a record debut in US trading for a foreign company. The stock rallied 13% on Friday as investors rushed to buy one of the hottest stocks of the moment on a US exchange, mainly because, even after last year's more than 1’700% rally, SK Hynix remains cheaper than some of its US peers. Its PE ratio stands near 18, versus Micron's, which currently trades at around 22.

Unfortunately, SK Hynix is down by more than 13% in Korea. From a technical perspective, it is now preparing to test a critical Fibonacci support level: the major 38.2% retracement of the April 2025 to June 2026 rally. This level should distinguish between a continuation of the positive trend and a medium-term bearish consolidation phase, which would point to a deeper downside correction.

The reason why this stock, along with other memory chip makers, has gone parabolic is that AI demand has somehow created the perception that a sector historically defined by boom-and-bust cycles could remain permanently in the boom phase. SK Hynix, since we're talking about the company, is planning to double its production capacity over the next five years to keep up with demand. The company's CEO says they would ideally need to increase capacity four- or five-fold, but he also admits that "he doesn't know" what the coming years will bring. Technological breakthroughs, more efficient AI models or simply a slowdown in AI infrastructure investment could quickly turn the market into one of oversupply.

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Author

Ipek Ozkardeskaya

ipekScope

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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