SK hynix, the world's leading AI memory chipmaker, saw its shares plummet over 15% on Monday, July 13, marking its largest one-day decline on record. This plunge occurred shortly after its highly successful NASDAQ debut last week, where it raised over $26 billion by selling ADRs priced at $149 each, which then opened 14% higher at $170 and closed their first trading day with a 12.8% gain. The decline in SK hynix's shares, along with rival Samsung Electronics, contributed to a 9% drop in the KOSPI index, leading to a 20-minute trading halt.
Analysts attributed the sharp decline to several factors, including investors engaging in profit-taking after the U.S. listing concluded. Sentiment was also negatively impacted by caution regarding SK hynix's second-quarter earnings. Ryu Young-ho, a senior analyst at NH Investment & Securities, noted that investors had tempered earnings expectations because SK hynix, with its greater exposure to the High-Bandwidth Memory (HBM) market than Samsung, was anticipated to benefit less from a recent increase in prices for conventional DRAM chips.
The sell-off in Seoul-listed shares was also driven by foreign and institutional investors, who offloaded 1.41 trillion won and 1.47 trillion won, respectively, as investors rotated from Korea-listed shares to the more accessible U.S.-listed ADRs. This created a significant premium for the ADRs, which were trading at about a 37% premium to its South Korean share price. A report from Korea Investment & Securities projected SK hynix to fall 8% short of its second-quarter operating profit consensus, forecasting $60.4 trillion won in profit against a $65 trillion won estimate, further adding to the selling pressure.
Despite the immediate downturn, the long-term outlook for SK hynix's HBM chips, primarily used in AI systems for customers like Nvidia and Google, remains strong. SK hynix held a 58% revenue share in the HBM market in the first quarter. The company plans to invest part of the $26.5 billion proceeds from the ADR sale into building new fabrication plants and purchasing chipmaking equipment in Korea, with HBM4 chips expected to enter full-scale mass production starting in the third quarter.
