SK Hynix makes largest foreign IPO in US in test for AI sector

A company that many people may have never heard of a year ago scored the largest American listing in history by a foreign corporation, granting American investors direct access to one of the hottest deals of the year.

On Friday, semiconductor manufacturing giant SK Hynix begins trading at $149 per share, raising about $26.5 billion. The last foreign company to post a record US debut was Chinese e-commerce giant Alibaba, which raised $25 billion in its 2014 IPO.

The milestone set by a once-obscure name underscores the enthusiasm that has repeatedly driven technology stocks to all-time highs this year. The massive construction of data centers to enable artificial intelligence has boosted demand for memory chips manufactured by SK Hynix.

The rush to buy shares in SK Hynix and Samsung, the world's largest memory chip maker, has turned South Korea's stock exchange into the world's seventh-largest after overtaking Canada's in May. Both companies, which together account for about 50% of Seoul's Kospi index, have reached $1 trillion valuations in recent months.

However, the urge to profit from the AI boom, especially among retail investors, has also exacerbated extreme swings in the market. Precipitous drops in South Korean stocks have triggered temporary trading halts several times this year.

Jung In Yun, executive director of Fibonacci Asset Management Global, said that although foreign investors have been quick to sell to secure gains, the listing of SK Hynix indicates that there is still a lot of optimism regarding AI.

"Strong supply demand suggests that global appetite for AI infrastructure remains intact despite recent volatility," he said.

Boom or Bust?
SK Hynix and Samsung posted record profits this year as AI consumed the world's supply of memory chips - and demanded even more. Projections of a prolonged shortage have led companies to invest heavily in manufacturing capacity, encouraged by their respective national governments.

Earlier this month, South Korea announced plans to invest more than $500 billion in new chip manufacturing facilities in the country's southwest.

President Lee Jae Myung called for rapid implementation of plans to secure land, water and energy, and maintain the country's leadership in advanced technology.

In a regulatory filing, SK Hynix said that funds raised in the American market will help the company build new production facilities in Korea.

"This pivotal $26.5 billion US listing gives them the power to surpass Samsung in scale, close the valuation gap with American rivals like Micron, and secure elite talent at attractive pay and boost corporate morale," said MS Hwang, research director at Counterpoint Research, specializing in memory semiconductors.

Still, the rapid expansion of memory chip manufacturers, coupled with the rise of leveraged bets on these companies, has raised concerns about an imminent slowdown in the semiconductor market, given its cyclical nature.

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Lending by retail investors on the Kospi market has reached record levels this year, according to data from the Korea Financial Investment Association. Some South Korean lawmakers have warned about the financial risks of buying leveraged exchange-traded funds, which track individual stocks like SK Hynix and can magnify gains - or losses.

Tech stocks in both South Korea and the US have also been vulnerable to shifts in sentiment toward AI, and signs that the technology is not delivering the returns on investment or revolutionary changes promised.

"The danger is that if results disappoint expectations - which we somewhat think is likely - stock prices, especially in technology companies, will start to fall in late 2027 and we will see a slowdown in business investment in the US," said Gareth Leather, senior Asia economist at Capital Economics, in a briefing this month.

"So it's very likely that, at some point, this boom in Asian exports will turn into a bust."

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Source: CNN