SK Hynix’s shares jump 14 per cent in US debut
SK Hynix’s U.S.-listed shares rose 14 percent in their Nasdaq debut; This suggests that investor interest in chip stocks remains intact despite their recent pullback from a dizzying rally.
The South Korean chipmaker has become the latest company to attract frenzied investor interest in firms seen as reaping huge gains from the artificial intelligence revolution, which has led to hundreds of billions of dollars in capital spending.
Chip stocks have lost some momentum after a spectacular rally in recent weeks, in part due to investors’ concerns about slowing AI spending.
SK Hynix shares are down a quarter from their record high two weeks ago.
Despite this, the company’s shares are about 630 percent higher than a year ago.
“Global semiconductors is the most crowded business in the world right now,” said Thomas Hayes, president of Great Hill Capital in New York.
“The bankers and the issuer, in this case SK Hynix, are meeting demand where it is. They see extreme valuations and want to capitalize on that.”
SK Hynix’s American Depositary Receipts (ADRs), ten of which equal one common share, opened at $170 per unit.
The offer price was US$149, up 2.7 percent from the average share price over the last three trading days in Seoul.
“Demand for US share sales has been stronger than some expected. This means the memory chip rally may have just taken a breather rather than peaking,” said Dan Coatsworth, head of markets at AJ Bell.
The offer, the second-largest share sale in the U.S. after SpaceX’s record IPO last month, would provide SK Hynix with funds to build new factories and give the chipmaker direct access to the world’s largest pool of investors.
The offer was more than seven times oversubscribed, a source told Reuters on Thursday.
“This is the purest large-cap way for US investors to own the AI-memory theme, and Hynix has deliberately chosen Nasdaq to capitalize on this demand and higher valuations dominated by US chip names versus Seoul,” said Giuseppe Sette, co-founder of investment analysis platform Reflexivity.
“SK Hynix is making the deal on the strength of the story, but companies that come after it may face a tougher, more selective market.”
The South Korea-based company Icheon is the world’s largest manufacturer of high-bandwidth memory (HBM) chips, which are needed to process large amounts of data in AI-driven graphics processing units (GPUs) produced by companies such as Nvidia and AMD.
SK Group chairman Chey Tae-won told Bloomberg TV that the company may offer memory-as-a-service to help address AI-related memory bottlenecks.
Tae-won stated that the company aims to develop 5 gigawatts of artificial intelligence data center capacity outside South Korea, adding that the company is open to more US investments.
The massive tech spend on these advanced processors has turned HBM chips into a scarce commodity, driving up prices and turning manufacturers into some of Wall Street’s hottest bets, as investors view the industry as “picking and shoveling” purveyors of the AI boom.
SK Hynix’s US-based rival Micron also increased by 711 percent in the last 12 months.
Analysts say listing SK Hynix in the US will help narrow the valuation disparity between the two companies by expanding its investor base and accessibility.
Despite HBM dominance, SK Hynix trades at around 5.8x forward earnings compared to Micron, according to LSEG data.
