South Korean chip manufacturer SK Hynix isn’t one of the Magnificent 7 stocks, but it’s in a class of its own after staging a stunning rally on the AI boom and is poised to hit US markets.
The shares will be listed on Nasdaq and are expected to begin trading on Friday. Around $29 billion could be raised. This could be the largest initial share sale ever by a foreign company.
This comes after Korea-listed shares of SK Hynix have risen 770% over the past 12 months, even after a 20% sell-off since their peak in June.
The increase even exceeds micron Technology rebounded 700% over the same period, with memory chip makers emerging as key enablers of AI agents. And SK Hynix is the top high-bandwidth memory provider 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 an important barometer for the market.
In fact, the Korean company has already made waves around the world. Comments from SK Hynix last month that it was planning to slow down its AI storage business caused the high-flying Kospi stock index to suffer its fifth-biggest daily fall ever. Global stock indexes followed, and Micron’s strong gains weren’t enough to revive confidence.
For the analysts at Capital Economics, the fluctuations were big particularly worryingand pointed out that such sell-offs have previously only occurred during bear markets, such as the Asian Financial Crisis, the dot-com bubble and the Great Financial Crisis.
“This volatility, in our view, is evidence of excessive excitement and calls into question the sustainability of this rally,” wrote James Reilly, senior market economist.
Shares of SpaceX, which is also an AI company after acquiring xAI, have been similarly volatile since its IPO. The stock jumped in the first few trading sessions, then fell sharply and is back near its first day closing price.
Even bonds that SpaceX issued shortly after the IPO quickly sold off, reaching levels comparable to junk-rated borrowers despite having an investment grade rating.
The fluctuations were another worrying sign of the market’s direction and are reportedly contributing to OpenAI’s IPO, which could be pushed back to 2027 instead of later this year.
It shouldn’t be like that. With hostilities between the US and Iran finally over, the path seemed clear for the AI boom to reach even greater heights as oil prices and bond yields fell.
But higher-than-estimated earnings reports and upbeat forecasts – unheard of during the 1990s tech bubble – haven’t been enough to sustain the upward trend as investors begin to doubt whether earnings will be as strong as expected.
Spending by so-called hyperscalers has exploded so quickly that it could hit $1 trillion next year. As a result, there is no longer enough cash flow to continue feeding the beast, prompting companies to issue bonds and new stocks.
For now, demand on Wall Street has been enough to meet supply, but there are growing concerns about the sustainability of such a heavy reliance on debt.
A slowdown in capital spending by hyperscalers could reshape the chip market. Their insatiable demand has created shortages in consumer electronics, leading to shortages Apple and other device manufacturers to raise prices.
To meet high demand, SK Hynix will spend hundreds of billions of dollars on two new production facilities in South Korea. But in an industry notorious for its boom-and-bust cycles, that capacity could ultimately lead to oversupply.
Analysts at Bank of America warned about this in a statement on Tuesday Stocks are on the way down and reiterated their year-end target for the S&P 500 of 7,100, a decline of 5% from the week’s closing price.
“Our signs of a bear market suggest that speculation is reaching extreme levels as richly valued stocks have been shown to have gapped to the upside, an event that has historically preceded a valuation snapback,” BofA said.