SK Hynix shares fell more than 10% on the Seoul Stock Exchange this Monday, just days after the South Korean chipmaker's debut on Nasdaq. The move was attributed to profit-taking by investors and a reassessment of the company's value amid growing demand for memory chips geared toward artificial intelligence.
Last Friday, the company began trading its ADRs in the United States with a 13% gain. The performance drew market attention and reinforced the interest of North American investors in companies that supply essential components for the development of artificial intelligence.
Despite the positive reception on Nasdaq, the sharp rise also led investors to review their positions in the South Korean market. Analysts say the new listing created an additional benchmark for evaluating the company, making the price difference between the shares traded in the United States and those listed in Seoul more evident.
Daniel Yoo, global strategist at Yuanta Securities, said that the market is still seeking a consensus on the fair value of companies in the sector amid the rapid expansion of AI and expectations of increased memory supply.
“Everyone is really confused about what is going to happen with memory demand and what the fair price will be,” Daniel Yoo, global strategist at Yuanta Securities, said on the program “Squawk Box Asia.” “It all comes down to how much demand there is compared to how much supply will enter the market... [and] what multiple will be obtained.”
According to the strategist, SK Hynix ADRs are traded at a premium of approximately 13% to 14% relative to the company's shares in South Korea. This difference widened the discount between the two listings and encouraged some investors to take profits after the recent appreciation.
Yoo also highlighted that the increase in the number of shares available for trading contributed to the pressure on the shares traded in Seoul.
“The market is viewing this as a correction period for SK Hynix in the domestic market.”
Even with the correction, the analyst believes the company's fundamentals remain solid. In his view, demand for memory chips intended for artificial intelligence continues to exceed the industry's supply capacity, which tends to support the sector's performance over the coming months, although short-term fluctuations remain present.
Phillip Wool, director of research at Rayliant Global Advisors, also attributed the recent move to a natural adjustment of investment portfolios. According to him, many managers significantly increased their exposure to Asian semiconductor manufacturers after the sharp rise in the shares and are now rebalancing to control risks.
“I think this is mainly about risk management,” Wool said, noting that many investors accumulated excessive positions in South Korean and Taiwanese AI chip manufacturers after their strong gains. “Prudent risk management suggests that you need to reduce those positions.”
The executive added that the recent sales “do not indicate any decline in enthusiasm for AI hardware.” For Wool, the growth of investments in artificial intelligence continues to benefit memory manufacturers such as SK Hynix, as adoption of the technology advances across different segments of the industry.