Scottish Mortgage Investment Trust is sitting on massive paper gains from growth stock SpaceX. After initially committing $200m to Elon Musk’s unlisted rocket firm in 2018, its stake has swelled to about $5bn today — roughly a 25 times return!
Clearly then, this trust knows a thing or two about identifying top-notch growth shares and making a lot of money. It recently sold Tesla after 13 years, during which it generated around $6.2bn of realised profit for shareholders.
Therefore, it can pay to monitor what Scottish Mortgage has been buying…
Which stock has it just snapped up?
According to the trust’s recent Q2 update, it has been ploughing some profits into SK Hynix (NASDAQ:SKHY). The South Korean chipmaker recently carried out a secondary listing on the Nasdaq in July.
Since then, the stock has been incredibly volatile, and the firm’s Seoul-listed shares are still down around 43% since June!
Despite this, the investment thesis here is pretty straightforward. Due to the historic AI infrastructure buildout, memory chips are in short supply, which is creating an AI-driven boom in growth for related chipmakers.
SK Hynix controls over half of the global high-bandwidth memory (HBM) market. It also holds the number two position in revenue market share for both conventional DRAM and NAND flash.
With its chips used heavily in Nvidia‘s market-leading AI products today, SK Hynix is a direct play on the data centre buildout. The memory shortage is expected to go on until 2027, at least, with global tech giants aggressively increasing their AI investments.
Truly eye-popping growth
If you thought Nvidia’s growth in recent years was strong, check out SK Hynix’s Q2. The numbers are otherworldly, with revenue increasing 257% while net income skyrocketed 1,242%.
Yet, believe it or not, the company missed Wall Street’s expectations for even higher revenue growth! The interesting thing here is that after the sell-off, SK Hynix stock’s currently trading at around 6.5 times forward earnings. So it appears to be an absolute bargain, based on this metric.
Is this valuation a trap?
Now, the big risk here is that memory demand slows dramatically, as has eventually happened with every chip cycle in history. Boom and bust, basically. If this happens, then the low P/E essentially becomes a mirage/trap.
Then again, the stock has already cratered nearly 50%, so it’s certainly less risky than it was a few weeks ago. And management doesn’t think demand is going to be an issue for some time.
As AI evolves into agentic forms that perform complex tasks on behalf of users and expands across various services, the underlying demand base for memory is broadening. Consequently, a structural shift is occurring where demand for both AI memory and conventional memory is expanding in tandem.
Q2 2026.