Jim Cramer sees major implications from SK Hynix's home-run quarter

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Mad Money

Published Wed, Oct 28 20266:59 PM EDT

Key Points

• CNBC’s Jim Cramer said SK Hynix’s blockbuster earnings showed that AI stocks can still rally despite growing investor skepticism about the massive data center build-out.
• Cramer pointed to low valuations, strong earnings, accelerating growth and sustained demand as key ingredients for a rally, adding that SK Hynix’s results could bode well for rival Micron.

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CNBC's Jim Cramer said Wednesday that SK Hynix's blockbuster earnings proved artificial intelligence stocks can still rally in a market that has grown increasingly skeptical of the massive data center build-out.

The South Korean memory giant's New York-listed shares surged more than 13% after it delivered better-than-expected results and an upbeat outlook. The report lifted other chipmakers, with Micron jumping almost 6%, Arm advancing 4% and AMD rising 3%. The rally stood out at a time when even strong earnings haven't been enough to lift some AI-related stocks, as investors question whether the enormous spending on data centers will pay off.

"SK Hynix put on a clinic last night about how you can get your stock to move higher," the "Mad Money" host said.

Cramer identified several factors that helped SK Hynix overcome Wall Street's skepticism, starting with its low valuation. The company trades at just four times 2027 earnings, reflecting doubts about whether the memory boom can last. That left room for the stock to rally if results exceeded expectations.

And SK Hynix delivered. Revenue topped estimates by roughly 6%, with gross margins of 85.7%. The company also projected shipment growth in the mid-20% range this quarter, up from 10% in the third quarter.

"Accelerating growth is like catnip to growth investors – it lets their imagination run wild about how good things could get," Cramer said.

Perhaps most importantly, SK Hynix indicated that its production was effectively sold out through 2029, supported by long-term customer agreements. Cramer said the outlook demonstrated just how strong demand remains for memory chips used in AI data centers.

He highlighted the company's plans to invest heavily in additional manufacturing equipment. Historically, expanding production has raised fears of oversupply and falling memory prices. "This time, demand is so strong that Hynix knows that more supply won't sate the market," Cramer said. "That shows a level of confidence that is extraordinary."

The company also outlined substantial shareholder returns through dividends and stock buybacks, giving investors another reason to be optimistic.

For Cramer, the combination of a low valuation, strong earnings, accelerating growth, sustained demand and shareholder returns offered a blueprint for how AI-related companies can win over investors in a challenging market.

"If you get through that gauntlet, then this market says you have a winner," he said.

Cramer said the results also bode well for Micron, which is a holding in Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club. He noted that Micron trades at a low multiple and has similar long-term customer agreements. There's also potential, he said, for the chipmaker to deploy its growing cash pile toward a significant buyback when CHIPS Act funding restrictions ease on Dec. 9.