Before heading to the U.S., SK Hynix dropped like a shitcoin

Original | Odaily ( @OdailyChina )

Author | Azuma ( @azuma_eth )

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

On the evening of July 1, news that "Meta may release excess computing power" sparked speculation that major companies might cut capital expenditure, leading to severe market volatility. As the narrative of "absolute scarcity" in AI computing power began to weaken, the semiconductor memory chip sector was directly impacted, with related concept stocks collectively experiencing a massive correction in the secondary market. SK Hynix's Korean stock closed down 14.57%, losing hundreds of billions of dollars in market cap in a single day.

• Odaily Note: See also Is the "biggest bearish signal" for chip stocks finally here? Will Meta be the first major company to cut capital expenditure?.

SK Hynix's Countdown to U.S. Listing

On June 30, SK Hynix filed an F-1 prospectus with the U.S. Securities and Exchange Commission (SEC), planning to list on Nasdaq through the issuance of "American Depositary Receipts" (ADRs). The planned fundraising amount is approximately 45.45 trillion KRW (about $29.4 billion), which is expected to be one of the largest ADR issuances in history. All proceeds from this fundraising will be used for domestic expansion in Korea, including the Yongin wafer fab, the Cheongju advanced packaging production line, and investment in EUV and related equipment.

• Odaily Note: An ADR is essentially a trading vehicle for non-U.S. companies in the U.S. stock market. ADRs are not shares of stock directly issued by the company but "substitute securities" issued by a depositary bank in the U.S., representing underlying shares of the foreign company. Through ADRs, investors can directly trade shares of overseas companies in U.S. dollars on the U.S. stock market without needing to open cross-border accounts or handle foreign exchange and settlement processes.

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

SK Hynix's decision to actively pursue a U.S. listing in the current cycle is essentially the result of a confluence of three factors: the industry cycle, the capital window, and the competitive structure.

First, SK Hynix is currently in a historically strong business cycle. 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 area, simultaneously propelling its overall DRAM business into a phase of high profitability. This has also synchronized its performance and stock price on an upward trajectory, forming a typical "peak-cycle refinancing window" – a massive expansion financing effort during the strongest phase of fundamentals.

Second, looking at the 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 provides significantly higher valuation benchmarks and liquidity premiums for the AI industry chain. In contrast, the Korean market has long suffered from what is known as the "Korea discount," where similar semiconductor assets are generally valued lower than their U.S. counterparts. Therefore, one of the core significances of SK Hynix's U.S. ADR issuance is the hope of having the company re-priced within a higher valuation framework.

Finally, memory giants are in fierce competition to expand production, which heavily relies on sustained massive capital investment. SK Hynix's current fundraising, approaching $30 billion, will be entirely used for wafer fabs, advanced packaging, and equipment expansion, essentially seeking to convert capital advantage into production capacity advantage.

It's Dropped Like This, Can We Still Buy Hynix?

Originally, SK Hynix's U.S. listing could have been seen as a historic moment for the memory industry. However, the sharp correction starting last night has introduced significant uncertainty about its future trajectory. Should one buy the dip, waiting for it to take off 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 major correction in the sector, is more akin to a liquidity-driven stampede amplified by sentiment rather than a substantive reversal of the industry trend.

Let's first focus on the catalyst in terms of news flow – the "possibility of Meta releasing excess computing power." This news itself may be subject to overinterpretation.

When Bloomberg first released this news, the headline was "Meta Is Building a Cloud Business to Sell Excess AI Compute," but it was later changed to "Meta Is Planning a Cloud Business Sell AI Computing Power." However, other media outlets, including Reuters, had already used the first headline for their reposts.

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

Even if we were to assume that Meta is indeed planning to sell computing power, it would be difficult to constitute a sufficient reason to declare the end of the "AI capital expenditure cycle." From an industry logic perspective, Meta itself is relatively behind in the AI race. Its pressure regarding foundational models and computing efficiency objectively determines that Meta has some need for computing power scheduling and asset optimization. In this context, the externalization or commercialization of some computing resources is closer to an asset utilization optimization behavior rather than a systematic contraction in demand.

This type of "computing power redistribution" is not uncommon in the AI industry chain. Two months ago, SpaceX also commercialized some of its computing resources externally (e.g., leasing to Anthropic). Essentially, this stems from a rebalancing of costs and resource efficiency, not a negation of AI demand itself. Therefore, directly extrapolating a single company's computing power scheduling behavior of uncertain scale to "industry-wide excess" represents a clear logical leap.

As for why this news had such a significant impact, another key reason lies in the market structure. Before this decline, the semiconductor memory chip sector itself was at a relatively high level, with a high concentration of trend-following funds and leveraged ETFs. In this structure, market sensitivity to marginal information increases significantly. Once a narrative shock occurs, it can easily trigger amplified deleveraging and forced position reductions, thereby magnifying what was originally a "forecast adjustment level" fluctuation into a "price stampede level" correction.

Therefore, this correction appears more like a classic case of "sentiment panic combined with structural deleveraging." Personally, I lean towards selectively adding positions during this decline.

After all, SK Hynix is in a critical window before its U.S. listing. With a fundraising size approaching $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.