SK Hynix launches $29 billion US IPO on Nasdaq after 770% surge, testing AI chips market strength

After a nearly 800% explosion, this AI supplier is about to make its U.S. debut and could signal if the market can still boom -- or is headed for a bust | Fortune

South Korean chipmaker SK Hynix isn't one of the Magnificent 7 stocks but is in a class of its own after pulling off a stunning rally on the back of the AI boom, and it's about to land on U.S. markets. Shares will list on the Nasdaq and are expected to start trading on Friday, raising about $29 billion in what could be the biggest-ever first-time share sale by a foreign company. That's after SK Hynix's Korean-listed stock has shot up 770% over the last 12 months, even after a 20% selloff from a peak in June. The surge even outpaces Micron Technology's 700% rally over the same time, with makers of memory chips emerging as critical enablers of AI agents. And SK Hynix is the top supplier of high-bandwidth memory after becoming Nvidia's favorite provider. While SK Hynix's U.S. stock listing won't be as big as SpaceX's $86 billion IPO last month, it could serve as a key barometer for the market. In fact, the Korean company has already sent ripples around the world. Comments from SK Hynix last month that it planned to slow down its AI memory business caused the high-flying Kospi stock index to suffer its fifth worst daily plunge ever. Global stock indexes followed, and strong earnings from Micron weren't enough to revive confidence. For analysts at Capital Economics, the big swings were especially worrisome, pointing out that such selloffs have previously only happened during bear markets like during the Asian financial crisis, the dot-com bubble, and the Great Financial Crisis. "This volatility is, in our view, evidence of excessive froth and calls into the question the sustainability of this rally," James Reilly, senior markets economist, wrote. Shares of SpaceX, which is also an AI company after acquiring xAI, has been similarly volatile since going public. The stock jumped in its initial trading sessions, then fell sharply and is back near its first-day closing price. Even bonds issued by SpaceX soon after the IPO quickly sold off, putting them at levels comparable to those of junk-rated borrowers, despite getting investment-grade ratings. The wobbles were another troubling sign about the market's direction and reportedly are factoring into OpenAI's IPO, which could be pushed out to 2027 instead of later this year. It wasn't supposed to be like this. With the U.S. and Iran finally ending hostilities, the path looked clear for the AI boom to reach even greater heights as oil prices and bond yields fell. But estimate-beating earnings reports and buoyant guidance -- which the 1990s tech bubble lacked -- haven't been enough to sustain bullishness as investors start to doubt whether profits will come in as strong as expected. Spending by the so-called hyperscalers has exploded so quickly that it could hit $1 trillion next year. As a result, cash flow is no longer sufficient to keep feeding the beast, prompting companies to issue bonds and fresh stock. For now, demand from Wall Street has been enough to meet the supply, but concerns are rising about the sustainability of relying so much on debt. Any slowdown in capital expenditures by hyperscalers could reshape the chip market. Their insatiable demand has caused shortages in consumer electronics, forcing Apple and other device makers to hike prices. To keep up with all the demand, SK Hynix will spend hundreds of billions of dollars for two new production plants in South Korea. But in an industry infamous for boom-and-bust cycles, that capacity could end up fueling oversupply. Analysts at Bank of America warned in a note on Tuesday that stocks are headed lower and reaffirmed their year-end S&P 500 target of 7,100, representing a 5% drop from the week's closing level. "Our bear market signposts suggest speculation is hitting extreme levels as high multiple stocks have gapped up demonstrably, an event that has historically preceded a valuation 'snapback,'" BofA said.

SK Hynix seeks access to AI investors in $29 billion U.S. listing | Fortune

For years, the South Korea-based semiconductor manufacturer has traded at a discount to its chief US-based rival, Micron Technology Inc. Tapping into the world's deepest equity market and its frenzy for all things related to artificial intelligence could help change that at a time when the companies that make memory chips and other equipment used in AI data centers are driving the performance of the S&P 500 Index. "We are in a time of extreme enthusiasm about chip stocks," said Daniel Morgan, senior portfolio manager at Synovus Trust Co., which owns Micron shares. "It's a good time to go and get the US involved in your shares." Betting on SK Hynix has been difficult, if not impossible, for the majority of American investors. Like Micron, the second-best performer in the S&P 500 this year with a scorching 242% gain, the company is benefiting from soaring demand for high-bandwidth memory chips. But owning SK Hynix's South Korea-listed shares outright means off-hours trading in the US. The other alternative is buying unsponsored American depositary receipts, or ADRs, over the counter. Not only are the unsponsored ADRs performing worse than SK Hynix's South Korea shares, but liquidity is also severely limited, making trading them a challenge. SK Hynix's Nasdaq listing, which is expected on July 10, should change that and improve the company's lagging valuation. The South Korean firm trades at 6.2 times estimated earnings over the next 12 months. Micron is currently at 7 times after the shares tumbled 14% last week, their worst performance since March, but it was over 11 times as recently as June 22. "The offering targets investors who currently lack access to the Korean equity market," said Di Zhou, portfolio manager at Thornburg Investment Management, which owns SK Hynix shares. "SK Hynix's Nasdaq listing provides direct, frictionless exposure to one of the most compelling pure-plays on the AI memory cycle." Over the past 12 months, SK Hynix's Korea-listed shares and Micron's stock have gained about 700%, pushing both companies' market capitalizations above $1 trillion. The rallies are hardly unique among memory and storage companies. Sandisk Corp. is leading the S&P 500 in that time, soaring 3,676%, while Western Digital Corp. is up 719% and Seagate Technology Holdings Plc has jumped 449%. Overall, the Philadelphia Stock Exchange Semiconductor Index has gained 125% in the past 12 months and is coming off its best quarter ever. Good Times Roll But investors are increasingly nervous about how much longer the good times can last. The tech giants driving the bulk of the memory demand, including Alphabet Inc. and Microsoft Corp., are increasingly turning to debt and equity markets to fund spending that until recently was coming from their cash piles. Those capital expenditures have sent memory chipmakers' profits through the roof. But if the spigot gets turned off, the whole dynamic will change. "Investors run the risk of stepping into something that's potentially a speculative bubble," said Ed O'Gorman, chief executive officer at River Wealth Advisors. "You have to be very careful investing in anything that's up the way these stocks have climbed." In the meantime, SK Hynix's ADRs will undoubtedly appeal to many US investors seeking more ways to bet on the biggest beneficiaries of AI spending. "There are a lot of people who don't own anything in this space, so it coming to market could draw people who have not bought in yet," said Kim Forrest, chief investment officer and founder at Bokeh Capital Partners, which owns Micron shares. She plans to sit out the offering due to some of the discrepancies surrounding governance of ADR listings, but she expects plenty of her peers to line up for a piece. SK Hynix is projected to deliver 221 trillion won ($144 billion) in net income in 2026 on sales of 355 trillion won ($231 billion), up 415% and 265%, respectively, from 2025. Micron is expected to post an 876% surge in net income to about $83 billion in its current fiscal year, which ends Aug. 31, on a 247% leap in sales to $130 billion. In an effort to keep up with demand, SK Hynix is planning to spend hundreds of billions of dollars to build two production plants in South Korea, as is rival Samsung Electronics Co. SK Hynix's offering will help fund those commitments. But adding capacity also raises the specter of a potential supply glut down the road if demand cools off. The memory industry is notorious for its boom and bust cycles. Just three years ago, Micron and SK Hynix lost money after a demand slump caused prices for memory chips to tumble. One clear benefit from the offering is it will provide SK Hynix with access to US equity indexes, which would result in buying from passively managed exchange-traded funds that track the benchmarks. For example, the Invesco QQQ Trust Series, better known by its ticker QQQ, tracks the technology-heavy Nasdaq 100 Index and has $482 billion in assets. Arbitrage Opportunity Wall Street bulls point to the deeper pool of capital, the ability to trade the shares during regular market hours and an eventual addition to the Nasdaq 100 as reasons to be optimistic about the ADRs. What's more, the US listing will attract trading from hedge funds seeking to capitalize on arbitrage opportunities between valuation differences in the Nasdaq-listed ADRs and the Seoul-listed shares -- a playbook used in previous offerings by Alibaba Group Holding Ltd. and Taiwan Semiconductor Manufacturing Co. "Because of the cross-market structure, there will be potentially premiums and discounts between the pair," said Brendan Ahern, chief investment officer of KraneShares, which owns Micron stock. "That will bring in arbitrage players and enhance the stocks' liquidity." It's unclear if investors can freely exchange the SK Hynix ADRs for the Korean shares, a feature that could determine whether the price differences persist and how arbs will set up their trades. Full convertibility would allow investors to exchange the two securities and keep prices closely aligned, while restrictions could leave the US listing at a sustained premium. This dynamic is playing out with Taiwan Semiconductor, where the average premium of the ADRs over the local price is more than 21% in the last year and currently around 13%, according to data compiled by Bloomberg. Perhaps most importantly, investors will be focused on SK Hynix's ability to close its valuation gap with Micron. The offering may be attractive to US investors ranging from long-only portfolio managers seeking to increase exposure to the booming share prices of memory stocks as well as hedge funds that focus on IPOs and other types of equity issuance. Synovus Trust's Morgan, who holds a small amount of SK Hynix through over-the-counter depositary shares, is curious about the new ADRs but is taking a wait-and-see approach when it comes to any purchases. "It's going to be a very hot issue," he said. "We're going to have to let it hit the tape and go from that."

SK Hynix IPO: South Korea's SK Hynix to launch $28 billion US listing to ride global AI wave

The company will sell 17.79 million new shares in the depository receipt listing on the ⁠Nasdaq, ⁠making it one of the world's most valuable tech firms. South Korean chipmaker SK Hynix will on Monday launch its about $28 billion U.S. listing, according to its regulatory filings, in one of the world's largest new share sales as it capitalizes on the global AI boom. The company will sell 17.79 million new shares in the depository receipt listing on the ⁠Nasdaq, ⁠making it one of the world's most valuable tech firms. Ten ADRs will represent one common share and the stock will be sold in a price range due to be revealed on Monday, based on SK Hynix's Seoul trading price. SK Hynix's share price was trading 1% higher and the stock is up about 273% this ⁠year, as it rides surging global investor demand for AI stocks. Korea's KOSPI was up 0.2% early Monday. SK Hynix has been ⁠among the world's largest beneficiaries of the AI boom as it outperformed its major rivals Samsung Electronics and Micron. The final price of the New York listing is due to be set on Thursday, ahead of the stock starting trade on Friday, regulatory filings showed. The company's management will meet global investors on a roadshow this week. The deal is expected to be the second-biggest share sale after a record $85.7 billion initial public offering by SpaceX last month, surpassing Saudi Aramco's $25.6 billion IPO in ⁠2019 and Alibaba's similar-sized offering in 2014. SK Hynix is a key supplier of high-bandwidth memory chips used in AI systems by customers such as Nvidia and Google. The company last week said it would invest 100 trillion won ($64.38 billion) to build new chip plants, including one for NAND flash memory, as part of a massive South Korean investment drive aimed at spreading returns from the AI boom.

Micron vs. SK Hynix: Nvidia's Top AI Memory Suppliers Are Set for a Wall Street Showdown - Micron Technol

The listing gives U.S. investors direct access to SK Hynix alongside Micron, which has until now been the primary U.S.-listed pure-play memory company benefiting from the AI boom. Both companies have emerged as beneficiaries of the AI infrastructure buildout, with investors increasingly favoring suppliers of critical components over technology companies that are spending billions to develop AI capabilities. The South Korean chipmaker has established itself as one of NVIDIA's largest suppliers of AI memory chips. At the same time, Micron has expanded its presence by qualifying its latest memory products for NVIDIA's Blackwell platform. Futurum Equities Chief Market Strategist Shay Boloor said the listing gives U.S. investors "a second direct way to play the AI memory boom" alongside Micron. A Potential Record Debut Pricing is expected to be finalized later this week before trading begins on July 10, Reuters reported on Sunday. The company, which has a market capitalization of about $1.1 trillion, said it will use the proceeds to expand chip manufacturing and advanced packaging capacity as it ramps up production of next-generation high-bandwidth memory chips (HBM) to meet growing AI demand. SK Hynix briefly overtook Samsung Electronics last month to become South Korea's most valuable listed company, underscoring how investors have increasingly rewarded memory makers as AI infrastructure spending accelerates. Why Micron Investors Should Care SK Hynix's listing gives domestic investors unprecedented, liquid access to the world's reigning high-bandwidth memory king, which currently has a 58% global market share in advanced AI memory compared to Micron's 21%, according to data by Counterpoint Research. Samsung holds the remaining share. Shares of SK Hynix closed 3.38% lower on Monday in South Korea. AI Memory Trade Faces Its Next Test SK Hynix's Nasdaq debut comes days after a broad selloff in AI-related semiconductor stocks, as investors questioned whether years of aggressive spending on artificial intelligence infrastructure would translate into returns quickly enough. The pullback weighed on memory makers despite continued optimism around long-term demand. Benzinga edge rankings indicate MU has a Momentum score in the 99th percentile and a Growth score in the 85th percentile. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.