SK Hynix celebrates triumphant US stock market debut on the Nasdaq, surpassing Alibaba as the largest foreign IPO

As Dow Jones Newswires reported, citing the US Securities and Exchange Commission (SEC), the industry heavyweight issued just under 178 million so-called depositary receipts (American Depositary Receipts, ADRs). These are securities issued by US banks that enable trading in foreign stocks in US dollars. On Thursday, SK Hynix had announced the successful sale of 177.9 million ADRs at a price of $149 each. In total, the group raised approximately $26.5 billion.

It took two hours after the start of trading before the first price could be determined. The shares ultimately opened at around $170 and continued to climb during the course of trading. Most recently, the premium over the issue price amounted to as much as 17.4 percent, reaching just under $175. This makes SK Hynix's US IPO the second-largest in the history of US stock exchanges, as Dow Jones Newswires further reported. The only larger one to date was the IPO of the aerospace and AI company SpaceX.

SK Hynix joins the trillion-dollar club

By surpassing the one trillion dollar market capitalization mark, SK Hynix joins an exclusive circle of currently only 16 companies worldwide that have crossed this threshold. Last year, the company's market value had temporarily more than twelvefold. SK Hynix's computer chips are used internationally in data centers for artificial intelligence. The company primarily manufactures memory chips of the HBM (High-Bandwidth Memory) type, which are essential for processing large volumes of data in AI graphics processing units (GPUs) from manufacturers such as Nvidia and AMD.

The IPO is taking place against a backdrop in which the boom in AI chips has buoyed prices in the semiconductor industry. Competitors such as Micron, Samsung, the Taiwanese chip producer TSMC, and the Dutch lithography machine manufacturer ASML have also recorded strong price gains over the past twelve months. However, the upswing has stalled over the past two weeks, as doubts have arisen about the sustainability of the AI boom and the pace of data center expansion.

Huge demand from institutional investors

Demand for the shares was enormous. According to reports in American financial media, demand on Thursday exceeded supply by more than sevenfold. The placement was reportedly oversubscribed many times over. Institutional investors such as Baillie Gifford also secured larger positions, according to reports. On the Nasdaq, SK Hynix ADRs are trading at a significant premium to the closing price of the stock on the Seoul exchange, where SK Hynix has been listed for decades. With the US listing, the company has succeeded in reducing its persistent valuation discount relative to American competitor Micron.

At the symbolic opening of the trading day on the Nasdaq on Friday morning (local time), Group CEO Kwak Noh-Jung appeared visibly moved. «Heute ist ein wirklich historischer Tag für SK Hynix», he said. SK Hynix is the world's largest manufacturer of HBM memory chips (High-Bandwidth Memory). The company plans to use the fresh capital to significantly expand its own manufacturing capacity, particularly in South Korea, and to order state-of-the-art lithography machines from ASML worth eight billion dollars.

Mixed sentiment on US stock exchanges

The broad US stock market proved robust on Friday. The Dow Jones Index gained 0.2 percent to 52,603 points at midday (local time), while the Nasdaq indices rose by up to 0.2 percent. Traders cited the SK Hynix IPO as a sentiment boost. Patrick Munnelly of Tickmill Group said: «Das ist genau die Art von Story, die Aktienanleger in die Berichtssaison hinein haben wollen.» Munnelly added that the willingness to invest in Hynix and the Korean chip complex shows that investors continue to view the AI boom as a structural story rather than a short-term passing trend.

However, trading on the US markets was not uniform across all sectors. Shares of aviation companies came under pressure after an incident involving a Boeing 737 from Ryanair in Greece shortly after takeoff, in which a window was torn out and a passenger was partially pulled from the aircraft. American Airlines lost 0.8 percent, United Airlines 1.2 percent, and Boeing 0.3 percent. Delta Air Lines shares fell by 1.6 percent, even though the airline had exceeded market expectations with its quarterly figures – the decline was attributed to significantly higher fuel costs. Authorities point to parallels with an incident at Southwest in 2018, in which a passenger died following engine damage.

Movements on the currency and commodity markets were modest. The dollar index lost 0.1 percent, a barrel of Brent crude oil fell 0.8 percent to $75.73. The gold price slipped 0.2 percent to $4,111 per troy ounce, while the yield on ten-year US government bonds rose by one basis point to 4.55 percent. The International Energy Agency (IEA) stated that global oil demand is recovering after months of disruptions in the Middle East. The IEA also pointed out that a resumption of fighting between the US and Iran shortly before a new supply wave in the coming year is creating uncertainty.

US President Donald Trump confirmed in a social media post that the US had agreed to further talks with Iran. At the same time, he declared that the US had told Iran that the ceasefire was over. Francesco Pesole of ING wrote in a research note that markets are taking a clearly optimistic stance toward the US-Iran conflict despite renewed tensions, which is weighing on the dollar. Gold is likely to suffer in the short term from geopolitical tensions and high interest rates, according to Ahmad Assiri, research strategist at Pepperstone.

Outlook: US earnings season and geopolitical risks

The US earnings season in the coming week will be dominated by the major banks. JP Morgan, Bank of America, Goldman Sachs, Wells Fargo, and Citigroup will publish their quarterly figures on Tuesday, followed later in the week by Netflix, UnitedHealth, and Johnson & Johnson, among others. The SK Hynix IPO is one of the largest IPOs of the year in the United States and exceeds the volume that Alibaba raised in 2014 with a US IPO of $25 billion at a market capitalization of just over $230 billion. In the United States, it is also the largest IPO by a foreign company ever listed on a US exchange.

Prior to SK Hynix, the Japanese memory chipmaker Kioxia had apparently already made preparations for a US listing on the New York Stock Exchange. Listing on a US market has by now become a proven path in the semiconductor industry to reduce the valuation discount relative to US competitors. However, memory chipmakers such as SK Hynix and Micron have historically been exposed to strong boom-and-bust cycles, in which phases of strong sales alternate with multi-year downturns.

Long-term significance in the AI chip cycle

Overall, SK Hynix's market launch shows that investor interest in companies operating along the AI value chain remains unbroken. The Nasdaq owes an additional boost to the South Korean newcomer, even though the overall market presented itself rather calmly on Friday. With an opening price of around $173 per ADR and a later quotation of $174.90, the company has successfully staged its premiere on the US technology exchange Nasdaq.

For the coming weeks, it remains to be seen whether the hype around AI chips will continue or whether the doubts that have recently arisen about the pace of data center expansion will put prices under pressure again. However, the course of the IPO so far suggests that professional investors continue to bet on the long-term potential of memory chips for AI applications.

With the fresh capital from the US IPO, SK Hynix is well-equipped to help shape the next technological leap in semiconductor manufacturing and to further expand its position as the world's largest HBM manufacturer. The order for ASML machines worth eight billion dollars underscores the group's ambition to bring its own manufacturing up to the most modern state of the art.