Just before heading to the U.S., SK Hynix plunged like a memecoin

Original: Odaily (@OdailyChina)

Author: Azuma (@azuma_eth)

SK Hynix's process to list in the U.S. has entered its final stage. However, just as the Korean memory giant was about to debut on the Nasdaq, the narrative around AI and the semiconductor industry experienced a sharp sentiment reversal in a very short period.

On the evening of July 1st, news that "Meta may be releasing excess computing power" sparked speculation that major tech firms might cut capital expenditures, leading to significant market volatility. As the narrative of "absolute scarcity" of AI computing power began to show cracks, the semiconductor memory chip sector took a direct hit, with related concept stocks collectively experiencing a massive pullback in the secondary market. SK Hynix's Korean stock closed down 14.57%, losing hundreds of billions of dollars in market value in a single day.

• Editor's note: Please refer to Is the "biggest bearish signal" for chip stocks finally here? Could Meta be the first major firm to cut capital expenditures?.

Countdown to SK Hynix's U.S. Listing

On June 30, SK Hynix filed an F-1 registration statement with the U.S. Securities and Exchange Commission (SEC), planning to list on the Nasdaq by issuing American Depositary Receipts (ADRs). The proposed fundraising amount is approximately 45.45 trillion Korean won (about $29.4 billion), potentially making it one of the largest ADR issuances in history. All proceeds from this offering will be used for capacity expansion in South Korea, including the Yongin wafer fab, the Cheongju advanced packaging production line, and investments in EUV and related equipment.

• Editor's note: An ADR is essentially a trading vehicle for non-U.S. companies on the U.S. stock market. ADRs are not company-issued U.S. stocks directly, but "substitute securities" issued by a depositary bank in the U.S., backed by the underlying common shares of the foreign company. Through ADRs, investors can directly trade overseas company stocks in U.S. dollars on the U.S. stock market without needing to open an overseas account or handle foreign exchange and settlement procedures.

The transaction is jointly underwritten by Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase. A total of 17.79 million new shares (representing 2.5% of its total issued shares) will be offered, under the ticker symbol SKHY. Regarding the timeline, the ADRs are expected to begin trading on the Nasdaq on July 10.

The reason SK Hynix is actively pushing its U.S. listing during this cycle is fundamentally the result of a confluence of factors: the industry cycle, capital window, and competitive structure.

First, SK Hynix is currently in a historically prosperous phase. Driven by demand from AI servers, High Bandwidth Memory (HBM) has become the most critical supply bottleneck. The company holds over a 50% market share in this segment, simultaneously pushing its overall DRAM business into a high-profit stage. This has also put its performance and stock price on an upward trajectory, creating a classic "cyclical high financing window" – raising capital for large-scale capacity expansion during its strongest fundamental period.

Secondly, from the perspective of capital market structure, the U.S. market remains the primary pricing center for global AI assets. Whether it’s Nvidia, AMD, or memory chip companies like Micron, the U.S. stock market generally assigns a significantly higher valuation benchmark and liquidity premium to the AI supply chain. In contrast, the Korean market has long suffered from a so-called "Korea discount," where valuations for similar semiconductor assets are generally lower than their U.S. counterparts. Therefore, one of the core significances of SK Hynix's ADR issuance in the U.S. is the hope of being re-evaluated within a higher valuation framework.

Finally, memory giants are in fierce competition to expand production, and capacity expansion heavily relies on continuous massive capital investment. SK Hynix's nearly $30 billion fundraising, all of which will be used for wafer fabs, advanced packaging, and equipment expansion, is essentially an attempt to convert capital advantage into capacity advantage.

After Such a Drastic Fall, Is Hynix Still Worth Buying?

Initially, SK Hynix's U.S. listing could have been seen as a historic moment for the memory industry. However, the significant pullback starting last night has injected tremendous short-term uncertainty into its future prospects. Is it time to buy the dip, anticipating a surge after the U.S. listing? Or should one decisively reduce positions to avoid a potential bubble burst?

Disclaimer: The following section is purely personal opinion and does not constitute investment advice.

In my personal view, this sharp decline in SK Hynix, including the substantial pullback in the sector, is more akin to a liquidity stampede driven by emotional amplification rather than a fundamental reversal of the industry trend.

Let's first focus on the trigger on the news front – "Meta may release excess computing power." The news itself was subject to over-interpretation.

Bloomberg's initial headline for this story was "Meta Is Building a Cloud Business to Sell Excess AI Compute," which was later changed to "Meta Is Planning a Cloud Business to Sell AI Computing Power." However, other media outlets, including Reuters, had already republished the story using the first headline.

There were two key changes between the headlines. First, "is building" was changed to "is planning," directly weakening the certainty and timeliness of the report. Second, the word "excess" was removed. However, the initial phrasing was easily interpreted by the market as "computing power is already in excess," leading to a chain of reasoning from "excess computing power → peak capital expenditure → weakening AI demand," ultimately causing market panic.

Even if Meta were confirmed to be selling computing power, it would be difficult to constitute a reason for declaring the end of the "AI capital expenditure cycle." From an industry logic perspective, Meta itself is relatively lagging in the AI race. The pressure it faces regarding base models and computing efficiency objectively means Meta has some demand for computing power scheduling and asset optimization. In this context, externalization or commercialization of some computing resources is more akin to an asset utilization optimization behavior rather than a systemic contraction in demand.

This type of "computing power redistribution" is not uncommon in the AI supply chain. Two months ago, SpaceX also commercialized some of its computing power resources externally. This is fundamentally a rebalancing based on cost and resource efficiency, not a denial of AI demand itself. Therefore, directly extrapolating a single company's computing power scheduling activity, whose scale is uncertain, to "industry-wide excess" represents a significant logical leap.

As for why the impact of this news was so severe, another key reason lies in market structure. Before this decline, the semiconductor memory chip sector was already at a relatively high level, with a high concentration of trend-following funds and leveraged ETFs. In this structure, the market's sensitivity to marginal information increases significantly. Once a narrative shock occurs, it easily triggers amplified deleveraging and forced position reduction, amplifying what should have been "expectation adjustment level" volatility into a "price stampede level" pullback.

Therefore, this correction looks more like a classic case of "emotional panic + structural deleveraging" combined. Personally, I lean towards using the opportunity from this decline to selectively add to positions.

After all, SK Hynix itself is in a critical window period for its U.S. listing. With a fundraising scale of nearly $30 billion, neither the underwriters nor the institutional funds participating in the subscription would likely want the stock price to perform too poorly after the listing.