By Heekyong Yang, Hyunjoo Jin and Joyce Lee

SEOUL (Reuters) -South Korea's SK Hynix on Thursday posted a record quarterly profit as the Nvidia supplier booked strong sales of its advanced chips, and said demand for high-bandwidth memory (HBM) chips would continue to outpace supply next year.

The company played down market concerns about an oversupply of the chips used in generative AI chipsets, saying production of higher-margin HBM chips was limited due to technological challenges, while demand was proving stronger than expected.

"We believe that it is premature to talk about demand slowdown for AI chips and HBM at this point," Kim Kyu Hyun, SK Hynix's head of DRAM marketing said on a conference call, citing ever-increasing requirements for computing power.

The world's second-biggest memory chipmaker swung to an operating profit of 7 trillion won ($5.07 billion) for the July-September quarter from a loss a year earlier. That compared with a 6.8 trillion won average forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate.

SK Hynix has outperformed rivals Samsung Electronics and Micron Technology in recent quarters, as it has benefited the most from AI-driven appetite for high-end memory chips following its early entry and large investments in HBM chip development.

Its bigger rival Samsung earlier this month warned its third-quarter profit would come in below market expectations and apologised for the disappointing performance, citing delays in sales of its high-end HBM3E chips to an unidentified major customer.

Nvidia CEO Jensen Huang said on Wednesday a design flaw with its latest Blackwell AI chips, which impacted production, had been fixed with the help of Taiwanese manufacturing partner TSMC. Those AI chipsets use HBMs made by SK Hynix, analysts say.

SK Hynix said HBM sales showed strong growth, up more than 70% from the previous quarter. Total revenue for the quarter rose 94% year-on-year to 17.6 trillion won.

"SK Hynix has reaffirmed its competitive edge in the HBM market. Its leading position as an HBM chip supplier is likely to continue next year," said Ko Yeongmin, an analyst at Daol Investment & Securities.

Shares of SK Hynix were trading up 2.3% against a 0.1% fall in the benchmark KOSPI as of 0318 GMT.

Its shares have jumped 38.5% so far this year, while Samsung's stock has slumped 24.7%. Samsung shares declined 2% on Thursday.

SK Hynix sees HBM sales making up 40% of its total DRAM revenue in the fourth quarter, up from 30% in the third quarter, and added it expects memory chip demand for AI servers to grow further next year as global tech companies are racing to develop generative AI.