SEOUL, April 25 (Reuters) - South Korea's SK Hynix Inc

said it expected a full recovery in memory chips on

AI demand, after posting its highest profit in nearly two years

on massive sales of its advanced DRAM chips such as high

bandwidth memory (HBM) used in generative AI chipsets.

The world's second-biggest memory chipmaker and Nvidia ( NVDA )

supplier reported a 2.89 trillion won ($2.1 billion)

operating profit for the January-March quarter versus a loss of

3.4 trillion won a year earlier.

It beat expectations for a 1.88 trillion won operating

profit LSEG SmartEstimate, which is weighted toward analysts who

are more consistently accurate.

"The memory market is entering into full recovery cycle with

ongoing strength of AI demand," SK Hynix said.

"Demand improvement from conventional applications is also

expected from the second half of 2024", meaning demand for chips

used in smartphones, personal computers and servers.

Thursday's result marks its second-highest profit for

the January-March quarter ever and a quick turnaround from heavy

losses incurred over a year to the third quarter of 2023 as the

global memory chip sector went through its worst downturn in

decades, hit by a slump in demand for tech devices post-COVID.

Among memory chipmakers, SK Hynix is the biggest beneficiary

of the explosive increase in AI adoption, as it became the main

supplier of HBM chips for Nvidia's ( NVDA ) graphic processing

units that train AI systems.

SK Hynix has been the sole supplier of HBM3 to Nvidia ( NVDA ), which

has 80% of the market for AI chips, and began mass production of

the latest version of HBM chips, called HBM3E, with shipments

going to the U.S. firm.

Its shares have climbed 96% in the past 12 months,

outperforming peers, on bets that its lead in HBM chip

development would better bolster SK Hynix's profitability.

First-quarter revenue rose 114% on-year to 12.4 trillion

won.

($1 = 1,374.6200 won)