SK Hynix's stock price is riding a "roller coaster", will the storage sector continue to fall? Stabilizing and rebounding?
On July 13, local time, SK Hynix ushered in the first trading day of regular mode on the Nasdaq Global Select Market through American Depositary Receipts (ADRs). Based on a 12.76% increase in pre-issuance trading on July 10, its ADR fell 9.32% to close at US$152.35 per share, which was close to its issue price of US$149. Affected by this, the storage sector of the U.S. stock market was among the top decliners, with SanDisk falling by more than 12%, and Micron Technology, AMD, and Western Digital falling by more than 4%.
On July 13, local time, SK Hynix ushered in its first regular trading day on the Nasdaq Global Select Market through American Depository Receipts (ADRs). After a 12.76% surge in pre-issuance trading on July 10, its ADRs fell 9.32% to close at $152.35 per share, which was close to its issue price of $149. Affected by this, the storage sector of the U.S. stock market was among the top decliners, with SanDisk falling by more than 12%, and Micron Technology, AMD, and Western Digital falling by more than 4%. At the same time, SK Hynix (000660.KS) continued to fall in the Korean stock market. After plummeting 15.37% on the 13th, SK Hynix continued to fluctuate after the opening on the 14th. Later, driven by the broader market, the price turned from falling to rising during the session. As of press time at 10:50 a.m., the stock price fell by more than 5 points. After a sharp decline in the storage sector of the A-share market, the decline narrowed on the 14th, and some stocks showed a stabilizing trend. The picture comes from a screenshot of Yingwei Financial Information website. The supply of new shares, capital transfer, market arbitrage, cyclical concerns and other factors are superimposed. The industry believes that these are the main reasons for the recent downturn in the stock price of this leading storage company. SK Hynix, which went public in the United States this time, raised US$26.5 billion, and the funds raised will be used for the construction of semiconductor factories. The scale of this issuance set a record for the largest overseas company IPO in the history of the United States. Globally, it is second only to the US$85.7 billion IPO set by SpaceX last month. It ranks as the second largest new stock issuance in the history of the world, exceeding Saudi Aramco's US$25.6 billion in 2019 and Alibaba's listing scale of approximately US$25 billion in 2014. Among the government investment plans and support plans announced by the South Korean government at the end of last month totaling more than 10 billion won, SK Group plans to invest 2.1 trillion won in SK Telecom's AI data center investment plan and SK Hynix's AI memory production belt construction plan. With the construction of AI infrastructure in full swing, the ambitious SK Hynix’s stock price has experienced a rocky situation recently. Its share price in the Korean market has fallen by nearly 40% since hitting a record high on June 25. SK Hynix CEO Guo Luzheng previously stated that 2027 will be the tightest supply year in the history of the storage industry. Although SK Hynix does its best to expand production capacity, customer demand may still be higher than the company's supply capacity even after 2030. Hu Guoqing, leader of the 6G and artificial intelligence research group at Peking University Shenzhen Research Institute, believes that Guo Luzheng’s speech is supported by solid industry fundamentals. Memory chips are in a long shortage cycle driven by AI. "From the demand side, AI has brought explosive growth to storage chips. Now the DRAM consumption of a single AI server is about 8 to 10 times that of a traditional server. After the iteration of large models, the demand for HBM will continue to increase nearly two or three times a year in the future. At the same time, giant companies such as NVIDIA, Google, and Microsoft have bought out in advance by signing long-term agreements with storage manufacturers. These factors have caused a relatively large squeeze on the spot market." Hu Guoqing believes that in addition to the rigid market demand for memory chips, from the supply side, it is also currently facing a situation where it is difficult to expand production capacity in the short term. "The construction cycle of advanced storage wafer fabs generally takes about three or four years. Combined with the rising cycle of this round of memory chips, this also means that new production capacity may not be released on a small scale until the end of 2027. On the other hand, HBM's production capacity is also crowding out some ordinary DRAM production capacity. From a global production capacity perspective, global DRAM production capacity, including HBM, is mainly concentrated in Samsung, SK Hynix, and Micron. In addition, the current domestic memory chip production capacity is still difficult to fill the gap in HBM." Regarding the decline in the storage sector caused by SK Hynix, Hu Guoqing believes that the direct trigger is that some securities companies in South Korea have lowered their profit expectations for SK Hynix. The company's HBM of Hynix is basically priced in long-term contracts, so it is difficult for the company to reap relevant dividends due to rising spot prices. In addition, after the good news is gone, it will also trigger a lot of selling transactions.
Hu Guoqing pointed out that there are also some differences in the market's demand for AI, including whether there is a surplus in the global computing power market. These are the comprehensive factors that triggered this round of decline in SK Hynix. (
Hu Guoqing pointed out that there are also some differences in the market's demand for AI, including whether there is a surplus in the global computing power market. These are the comprehensive factors that triggered this round of decline in SK Hynix. (