SK Hynix shares jump in marquee US debut as AI euphoria p…

SK Hynix's shares soared 14% in their Nasdaq debut, with pricing at $149 per share due to strong investor demand amid ongoing interest in chip stocks linked to the AI boom. Despite a recent 25% drop from its record high, the company's stock has surged 630% over the past year. The offering, deemed the second-largest U.S. share sale, was oversubscribed by more than seven times and aims to fund the construction of new factories. Analysts suggest that this U.S. listing might help close the valuation gap with competitor Micron. The broader memory chip sector remains attractive due to escalating AI-related demand, highlighted by substantial capital spending projections reaching up to $1.5 trillion by 2027. However, concerns linger regarding potential oversupply and investment returns.

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Summary
Companies
South Korean chipmaker's U.S.-listed shares open 14% higher
SK Hynix ADRs price at $149, above past three days' average
U.S. debut follows 25% drop in SK Hynix shares from record high
U.S. listing may help narrow discount to Micron's valuation

July 10 (Reuters) - SK Hynix's U.S.-listed shares jumped 14% in their Nasdaq debut following its $26.5 billion share sale, the latest indication that investor enthusiasm for chip stocks remains intact despite their recent pullback from a dizzying rally.

The South Korean chipmaker is the latest to ‌ride a frenzy of investor interest in firms perceived as reaping big gains from the AI revolution that has spawned hundreds of billions of dollars in capital spending.

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Chip stocks have lost some momentum in recent weeks after a stellar run, partly due to investor concerns about slower AI spending. SK Hynix (000660.KS), opens new tab shares have dropped a quarter from their record high hit two weeks ago. Even so, the company's stock is about 630% higher than a year ago.

Memory chipmakers surge

Chart showing the price performance of Micron, SK Hynix and Samsung Electronics

−10001002003004005006007008009001,000%

Samsung Electronics

360.27%

SK Hynix

677.94%

Micron

711.22%

Chart explorer. Use arrow keys ↑ ↓ ← → to navigate.

Note: All values in local currencies and rebased to zero

Source: LSEGAnhata Rooprai

"Global semiconductors is the most crowded trade in the world right now," said Thomas Hayes, chairman at Great Hill Capital in New York.

"The bankers and the issuer, in this case SK Hynix, are meeting demand where it is. They're seeing excessive valuations, and they want to take ⁠advantage of it."

SK Hynix's ADRs, ten of which equal one common share, opened at $170 apiece. The offer price was $149, which was a 2.7% premium to its average share price over the last three trading days in Seoul.

"Demand for the US share sale has been stronger than some people might have expected. That implies the memory chip rally might have just taken a breath rather than peaked," said Dan Coatsworth, head of markets at AJ Bell.

BIG INVESTOR POOL

The offering, the second-largest share sale in the U.S. after SpaceX's (SPCX.O), opens new tab record IPO last month, will bring in funds for SK Hynix to build new factories and give the chipmaker direct access to the world's largest pool of investors. The offering was more than seven times oversubscribed, a source told Reuters on Thursday.

Top 10 secondary listings in the U.S.

SK Hynix's share sale is the largest secondary listing in the U.S.

SK Hynix's share sale is the largest U.S.-listed secondary listing

SK Hynix

26.51

Petrobras

4.34

Sonera Group Oyj

3.65

BBVA

2.69

Korea Telecom Corp

2.49

Sterlite Industries (India) Ltd

2.02

Serono SA

1.98

Companhia Vale do Rio Doce - Vale

1.93

Chunghwa Telecom Co Ltd

1.58

VICI Properties Inc

1.39

STMicroelectronics NV

1.37

Chart explorer. Use arrow keys ↑ ↓ ← → to navigate.

Note: Values in $ billions

Source: Dealogic, company statementUtkarsh Shetti

"This is the purest large-cap way for U.S. investors to own the AI-memory theme, and Hynix deliberately picked Nasdaq to tap that demand and the higher valuations U.S. chip names command versus Seoul," said Giuseppe Sette, co-founder of investment analysis platform Reflexivity.

SK Hynix at the Nasdaq market in New York

SK Hynix set for marquee US debut in test for AI appetite

Item 5 of 5 The logo of SK Hynix is seen on its product during The 26th Semiconductor Exhibition (SEDEX 2024) in Seoul, South Korea, October 23, 2024. REUTERS/Kim Hong-Ji/File Photo

[5/5] The logo of SK Hynix is seen on its product during The 26th Semiconductor Exhibition (SEDEX 2024) in Seoul, South Korea, October 23, 2024. REUTERS/Kim Hong-Ji/File Photo Purchase Licensing Rights, opens new tab

"SK Hynix gets its deal done on the strength of the story, but companies coming after it may face a tougher, more selective market."

The Icheon, South Korea-based company is the world's biggest maker of high-bandwidth memory (HBM) chips, which ‌are essential ⁠for the vast amounts of data processing in AI-focused graphics processing units (GPUs) produced by the likes of Nvidia (NVDA.O), opens new tab and AMD (AMD.O), opens new tab.

SK Group Chairman Chey Tae-won told Bloomberg TV that the company could offer memory-as-a-service to help address AI-related memory bottlenecks.

The company aims to develop 5 gigawatts of AI data center capacity outside South Korea, Tae-won said, adding that it was open to more U.S. investments.

A big-tech splurge on these advanced processors has turned HBM chips into a scarce commodity, driving up prices and turning manufacturers into some of Wall Street's hottest bets, as investors view the industry as the "picks and shovels" suppliers to the AI boom.

Micron (MU.O), opens new tab, SK Hynix's U.S.-based competitor, ⁠has also rocketed 711% over the past 12 months. Analysts say SK Hynix's U.S. listing will help close a valuation disparity between the two companies by expanding its investor base and accessibility.

Despite its HBM dominance, SK Hynix trades at around 5.8 times forward earnings versus Micron at around 7 times, according to LSEG data.

Tech giants competing for faster and smarter AI models are pouring hundreds of billions of dollars into the infrastructure powering the ⁠technology, raising equity and tapping debt markets to fund the costly expansion.

AI spending boom

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SK Hynix shares jump in marquee US debut as AI euphoria persists

Memory chipmakers surge

BIG INVESTOR POOL

Top 10 secondary listings in the U.S.

AI spending boom

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