SK Hynix shares in Seoul experienced a rebound on Tuesday after a significant rout. This volatility follows its Nasdaq debut last week, where American Depositary Receipts (ADRs) were priced at $149 each, representing the world's leading AI memory chipmaker. The initial trading saw ADRs open 14% above the offer price at $170, closing their first day with a 12.8% gain, reaching $168. However, the excitement was short-lived as the ADRs plunged over 9% to $152.35 on Monday, dropping 7.9% to $154.7 in early trading on its second day and erasing much of Friday's gains. On the Kospi, SK Hynix's shares closed at 1.845 million won ($1,230), down 15.37% from the previous trading day, marking its biggest one-day fall in nearly two decades.
The decline in SK Hynix shares is attributed to several factors, including a "reset in expectations" across the memory semiconductor sector due to growing valuation concerns surrounding the AI boom. Analysts like Hebe Chen of Vantage Global Prime noted that SK Hynix is experiencing a "hangover after the dopamine rush." Lorraine Tan, Morningstar director, valued the company at $160 per ADR, but concerns about oversupply in 2027-2028 and the uncertain monetization of accelerating AI adoption, alongside a shift in funding towards debt or equity, have impacted sentiment. Other memory chip makers, including Micron Technology (down 4.4%) and Western Digital (down 4.6%), also saw declines on the New York Stock Exchange.
Investor profit-taking after the US listing and moderated earnings expectations further fueled the sell-off. Korea Investment & Securities projected SK Hynix's second-quarter operating profit to fall 8% short of consensus, forecasting 60.4 trillion won, below the 65 trillion won estimate. This shortfall is largely due to the company's heavier reliance on high-bandwidth memory (HBM), which is expected to result in slower average selling price growth compared to conventional DRAM and NAND chips. Despite CEO Kwak Noh-jung's forecast of a severe supply shortage into the next decade, analysts like Jing Jie Yu from Morningstar anticipate price erosion from fresh capacity coming online in 2027 and 2028.
The large-scale investments of over $26 billion raised from the ADR will be used for building chip fabrication plants and purchasing equipment in Korea. While this inflow is expected to bolster the won, the direct impact on local share premiums is still being assessed. The premium of US-listed ADRs (which represent one-tenth of a share) over Seoul-listed shares, trading at about a 37% premium after Monday's Kospi rout, has also been a point of discussion. Analysts highlighted that the current volatility is partly due to investors rotating out of Korea-listed shares into US-listed ADRs and the market's attempt to discover an appropriate premium, indicating that if the ADR premium holds and memory earnings remain strong, the recent pullback could be a pause before a second upswing rather than an end to the bull market. The sell-off in Seoul was largely led by foreign and institutional investors who offloaded 1.41 trillion won and 1.47 trillion won, respectively.
