SK hynix shares slump more than 15% as concerns mount around massive AI investments

The steep fall in the share price of the chip giant comes at a time of increased volatility in AI-related shares, with investors trying to gauge the sustainability of the huge AI investments and their ability to generate profits.

SK Hynix raised more than USD 26 billion by issuing ADRs to widen the investor pool for the company and issuing fresh shares. The ADRs were priced at USD 149 and opened with a 14 per cent gain at USD 170. The ADRs closed at USD 168 apiece, up nearly 13 per cent from the offer price.

The slide in the shares of SK Hynix along with its Korean rival Samsung, whose shares also fell more than 10 per cent on Monday, led to the Korean index KOSPI ending the day's session nearly 9 per cent down. The two semiconductor heavyweights dominate the index with a combined weight of more than 50 per cent.

Semiconductor stocks, especially memory chipmakers like SK Hynix, Samsung and their American rival Micron, have been on a tear this year with their shares in high demand among investors. The spectacular AI rally led to the three companies entering the USD 1 trillion valuation club this year.

However, the recent memory chip crunch has led to their prices rising, leading to consumer tech firms like Apple raising the prices of some of its offerings, like iPads and MacBooks.

Investors have expressed concerns around the huge AI investments that have run into hundreds of billions of dollars as hyperscalers like Amazon, Alphabet, Microsoft and others ramp up their compute capacities.

SK Hynix, which has benefited from the AI boom as the market leader in the high-bandwidth memory (HBM) chips, has pledged huge investments along with Samsung to increase the chip capacity in Korea. However, that may not serve as an immediate relief for the scarcity faced by the industry, with many concerned that this could hit margins. (ANI)