SK hynix IPO Prints Record 26.5 Billion US Dollars, Analysts Divided on AI Memory
SK hynix raised $26.5 billion through a listing on the United States. The value set a record for a foreign company IPO in the US, but it has not answered the big question of how long the AI memory business boom will last.
Quoted from the report of Korea JoongAng Daily, Saturday, July 11, the South Korean chipmaker set the offer price of American Depositary Receipt or ADR at 149 US dollars per share on July 10. The figure is about 3 percent above the previous trading closing price.
ADRs are certificates that represent foreign company shares and are traded on the United States market.
SK hynix issued 177.9 million shares and raised gross funds of 26.5 billion US dollars. Its value surpassed Alibaba's listing of 25 billion US dollars in 2014.
SK hynix's listing is the largest IPO in the US by a foreign company. Its value is also the second largest in the US market overall, just behind SpaceX.
Conditional trading began on Nasdaq on Friday with the code "SKHYV". Regular trading is scheduled to begin on Monday using the code "SKHY", while the funds are expected to enter the company after the offering is completed on Tuesday.
The new shares are equivalent to about 2.5 percent of all outstanding shares. The proceeds from the IPO will be used to build the first production facility in the Yongin semiconductor cluster, Gyeonggi Province, the Cheongju P&T7 advanced packaging plant, and to increase production capacity.
Advanced packaging is a technology to combine a number of chip components so that they can work faster and more energy-efficiently.
SK hynix is also preparing 11.9 trillion won, or about 7.9 billion US dollars, to buy extreme ultraviolet lithography equipment by the end of next year. The machine is used to print very small-sized circuit patterns on chips.
The investment is aimed at expanding the production of high bandwidth memory or HBM. This high-speed memory chip is an important component in AI servers and data centers.
Counterpoint Research estimates that the average operating margins of the three major memory manufacturers, namely Samsung Electronics, SK hynix, and Micron, reached 75 to 80 percent in the second quarter. The memory business growth cycle is expected to last at least until 2027.
Micron and Samsung are also expanding investments in HBM and chip packaging technologies. Micron announced an investment of around 14 trillion won for a new generation of HBM facilities in Hiroshima, Japan.
In the midst of this massive investment, analysts are still sharply divided in assessing SK hynix's share price.
BNK Investment & Securities maintained its "Hold" recommendation with a price target of 1.85 million won. The figure is about 11 percent below Wednesday's closing price of 2.076 million won.
BNK analyst Lee Min-hee said the supply of DRAM for AI servers and enterprise-class SSDs is still tight. DRAM is a working memory that helps servers process data quickly, while enterprise-class SSDs are used to store data on servers and data centers.
However, Lee believes that the race for AI infrastructure investment by giant cloud computing service companies is starting to lose steam.
Markets expect capital spending by cloud computing providers in the US to grow by about 23 percent next year. According to Lee, growth of at least 30 to 40 percent is needed to maintain current profit projections.
The calculation has included the increase in memory and CPU prices as well as the use of agent-based AI, an AI system that can run a series of tasks independently for users.
Most securities firms remain optimistic. KB Securities maintained a "Buy" recommendation and a target price of 4.2 million won by stating that "the peak is still far away".
NH Investment Securities set a target of 4.1 million won. IBK Investment & Securities and Kyobo Securities set a target of 4 million won, while Daishin Securities set a target of 3.9 million won.
Korea JoongAng Daily noted that analysts' targets ranged from 1.85 million won to 4.2 million won, more than doubling. Optimistic securities assess SK hynix is still ahead in HBM supply as AI memory needs continue to grow.
SK hynix is also facing geopolitical pressure. US Trade Minister Howard Lutnick publicly asked Samsung and SK hynix to build memory chip factories in the United States.
Bloomberg said Lutnick made the request at Micron's factory construction site in New York State. He said he wanted to bring Samsung and SK hynix to the US to build memory chip facilities.
The statement comes days after Samsung and SK hynix announced investment plans of more than 800 trillion won in South Korea's Honam region. Micron also raised its investment commitment in the US from 200 billion US dollars to 250 billion US dollars by 2035.
On the South Korean exchange, the Kospi index closed up 2.52 percent to 7,475.94 on Friday. Samsung Electronics and SK Square shares rose 2.52 percent and 6.18 percent, respectively.
SK hynix shares fell slightly by 0.27 percent to 2.18 million won. Foreign investors sold SK hynix shares worth 1.7181 trillion won, while Samsung Electronics shares were bought net worth 193.7 billion won.