SK Hynix shares dropped over 10% in early Seoul trade on Monday, July 13, following a 12.8% surge in its Nasdaq debut on Friday. The South Korean firm had raised over $26 billion by selling American Depositary Receipts priced at $149 each. The ADRs opened 14% above the offer price at $170 before ending their first trading day with a substantial gain. This immediate downturn in Seoul was attributed to investors booking profits after the successful US listing and moderating expectations for SK Hynix's second-quarter earnings. Some analysts noted that the high-profile listing had already been priced into the stock, leading to a "sell the news" reaction.
Several factors contributed to the profit-taking and investor caution. Ryu Young-ho, a senior analyst at NH Investment & Securities, highlighted that investors had moderated their earnings expectations, partly because SK Hynix, with its greater exposure to the HBM market, was anticipated to benefit less from the recent rise in prices for conventional DRAM chips. There were also concerns that the expected increase in HBM4 chip shipments from the second quarter had not materialized at scale. Despite the sharp pullback, analysts generally remained constructive on SK Hynix, whose Korea-listed stock had nearly doubled this year prior to the drop.
SK Hynix's decline significantly impacted broader Asian markets. The Kospi index in South Korea plummeted over 5%, triggering a brief circuit-breaker suspension. Rival chipmaker Samsung Electronics also saw its shares fall by as much as 8-10.5%. In Japan, the Nikkei 225 index lost about 2%, and Kioxia slumped over 11%. This widespread tech selloff was fueled by concerns over stretched valuations in the AI sector and questions about the vast sums being invested in AI infrastructure. SK Hynix held a 58% revenue share in the high bandwidth memory (HBM) market in the first quarter, with Samsung and Micron Technology each holding 21%, indicating its critical role in AI systems for major customers like Nvidia and Google.
Analysts like Ipek Ozkardeskaya of Swissquote expressed concerns that the AI demand had created a perception of a permanent boom phase for a sector historically defined by boom-and-bust cycles. While the AI boom has generated real profits from surging demand for computer memory, it has also led to worries that AI stock prices have become excessively high. SK Hynix's stock in Seoul had already soared over 600% in the past year due to AI euphoria, and the company plans to double its production capacity to meet demand. However, experts like Lorraine Tan of Morningstar warned that technological breakthroughs, more efficient AI models, or a slowdown in AI infrastructure investment could quickly lead to an oversupply.
The $26.5 billion US offering by SK Hynix was closely watched as a test for both overseas offerings and the sustainability of the artificial intelligence rally. Despite recent concerns about AI valuations, the deal was over seven times oversubscribed. However, the sell-off on Monday resulted in SK Hynix shares being down more than 30% from their June all-time high. The popularity of leveraged exchange-traded funds (ETFs) tracking the memory chip sector has also contributed to wild swings in the stock prices of SK Hynix and Samsung.
