Morgan Stanley analysts have upgraded SK Hynix Inc.'s rating from underweight to equal-weight. The analysts admitted misjudging their downgrade last September, seeing that the stock has surged due to positive expectations regarding the company's potential in providing advanced memory chips. Their previous call was based on anticipating the stock to underperform cyclically and facing tougher competition in high-bandwidth memory chips, which did not come to pass.

The downgrade by the Wall Street bank caused controversy, prompting a review by South Korea's financial regulatory body into whether the US firm abided by regulations. After realizing their mistake, the analysts admitted their error and raised the stock's price target. SK Hynix's shares have risen by 18% this year, despite a general decline in AI-related stocks globally, influenced by the repricing of technology costs due to China's DeepSeek AI model.

The analysts noted that SK Hynix's stock performance has been fueled by favorable pricing trends in the spot market and an anticipated reversal of the cycle. They remain cautious, emphasizing the importance of not being premature in their assessment and opting for an equal-weight rating over an overweight one. The analysts increased the stock's price target by 53% to 230,000 won to account for an improved sustainable return on equity, driven by expected long-term market share gains in high-bandwidth memory.