If You Missed NVIDIA Stock, This is Way Bigger.
Summary
Alex provides an in-depth analysis of SKH Highix (SKHY), highlighting its strategic position in the rapidly expanding AI memory market. Alex notes that SKHY, which recently listed its American Depository Shares (ADRs) on NASDAQ, dominates the high bandwidth memory (HBM) market with a substantial 50% share, outpacing competitors like Micron and Samsung combined in this crucial segment for AI data centers. Alex also points out a significant 40% premium for the NASDAQ-listed ADRs compared to their underlying Korean shares, attributing this to a restricted supply where only 2.5% of the company's shares can be ADRs.
Alex emphasizes that SKH Highix is not merely an HBM pure-play but a comprehensive memory chipmaker. The company's business is primarily divided into DRAM and NAND flash. The DRAM segment, accounting for about 73% of total revenue, includes both high-growth HBM, which is custom-built for AI chips and sold via long-term contracts, and conventional DRAM, which is more susceptible to commodity pricing cycles. The NAND flash segment, contributing 27% of revenue, focuses heavily on enterprise-grade solid-state drives (SSDs) for data centers, a business that Alex describes as a "second AI hardware business hiding in plain sight" and where SKHY is the second-largest supplier globally, thanks in part to its acquisition of Solidime from Intel.
Alex argues that the AI era has fundamentally changed the memory market, transforming it from a cyclical, low-margin business into one with high predictability and profitability. SKHY's operating margin surged to a record 76% last quarter, driven by the strong demand for HBM and enterprise SSDs. The shift to pre-negotiated, long-term contracts for HBM helps stabilize revenues and margins, although it can limit upside during rapid price increases. Furthermore, Alex details SKHY's critical multi-year partnership with Nvidia to co-develop next-generation memory for future AI platforms, including the Vera Rubin AI supercomputers, positioning SKHY as a strategic partner rather than just a vendor. Alex underscores that memory supply will remain constrained for years due to the complex manufacturing process, high wafer requirements, and the 4-5 years needed to build specialized fabs.
In terms of valuation, Alex compares SKHY to Micron and SanDisk. Despite the 40% ADR premium, SKHY trades at a lower price-to-earnings (P/E) ratio and a forward P/E ratio (16x P/E, 5.8x forward P/E) compared to Micron and SanDisk, which are above 20x P/E and around 7x forward P/E respectively. Alex concludes that SKHY's ADR offers a compelling investment opportunity due to its market leadership in HBM, its overlooked enterprise storage business, high margins, strategic partnership with Nvidia, and relatively cheaper valuation. Alex advises that investors able to purchase direct Korean shares should do so, but the ADR remains attractive despite the premium, with the caveat that the premium might shrink if SKHY issues more ADRs in the future.
Mentioned Stocks
Reasoning: Alex previously 'covered and invested in' Micron when it was the only major high-bandwidth memory (HBM) player listed on US exchanges. In this video, Alex uses Micron primarily as a benchmark for comparison against SKH Highix (SKHY) in terms of market share, revenue growth, operating margins, and valuation metrics like P/E and forward P/E ratios. While he notes SKHY trades at a discount to Micron, even with its ADR premium, he does not explicitly recommend selling Micron or initiating a new buy. His past investment is mentioned, but no current transaction or recommendation for new buys is given, making the sentiment neutral and author action null regarding *new* transactions or *current* explicit recommendation.
Reasoning: Alex states that SKH Highix (SKHY) is a 'great way to get rich without getting lucky.' He recommends buying SKHY due to its clear leadership in high bandwidth memory (HBM) with a 50% market share and its robust enterprise storage business, which he identifies as a significant, yet overlooked, second stream of AI-related revenue. Alex highlights the company's impressive 76% operating margins on hardware that is expected to remain supply-constrained for years, its crucial co-development partnership with Nvidia, and its relatively cheaper valuation compared to competitors like Micron and SanDisk, even after accounting for the 40% premium on its NASDAQ-listed ADRs. Alex advises that if investors can buy the shares directly on the Korea Exchange (e.g., via Interactive Brokers), that would be preferable due to the ADR premium, but considers the ADR still 'fairly cheap' relative to other memory makers. He warns that the ADR price could fall if SKH Highix issues more ADRs, which would reduce the premium.