SK Hynix, a South Korean memory chipmaker, has experienced a significant downturn, wiping out nearly $600 billion in market value over just a month. Its shares have plummeted 47% from their June all-time high, driven by concerns about market overcrowding and leverage-induced volatility. This decline has transformed SK Hynix from a leading AI trade into a major portfolio question mark, with its loss in market value comparable to that of SpaceX.
Despite anticipating another quarter of record earnings due to the AI boom driving up chip prices, investors are growing skittish. The primary fear is that increasing memory costs will compel customers to seek cheaper alternatives, potentially reducing usage. Further exacerbating these concerns, SK Hynix's stock dropped almost 15% after reports emerged of Chinese progress in deep ultraviolet (DUV) lithography machines, fueling worries about a potential surge in new capacity and broader anxieties regarding the AI rally. This also contributed to South Korea’s Kospi index falling by 10.8%, triggering trading halts.
Analysts like Andy Wong of Pictet Asset Management HK note the debate around whether memory is capturing an excessive share of profit, prompting a reduction in his fund's position in SK Hynix. The market is scrutinizing whether SK Hynix's margin squeeze on the supply chain is sustainable. The company's American depositary receipts have fallen below their July 9 offering price, and the proliferation of leveraged exchange-traded funds tied to the stock has amplified its unprecedented volatility. Still, bolstered by its early lead in high-bandwidth memory for AI, the stock remains on track for triple-digit annual gains, although the recent pullback reflects broader caution in the tech hardware sector regarding the durability of hyperscaler expenditures.
