SK Hynix's ADR plunged 9.3% on its second trading day, nearly erasing its entire gain from the debut. Analysts noted that HBM prices, constrained by long-term supply agreements, are rising more slowly than those of conventional chips, and projected that SK Hynix’s latest quarterly operating profit could fall 8% below market consensus. Korean media reported that SK Hynix plans to redirect a portion of the proceeds from its ADR offering into South Korean government bonds; this development has not yet been covered by major international media outlets.
The valuation bubble fueled by the AI chip boom is now under pressure and unwinding. SK Hynix’s American Depositary Receipts (ADRs) plunged on their second trading day, as sharp volatility in South Korean equities spilled over to Wall Street, sharply intensifying global investors’ doubts about the sustainability of the AI-driven rally.
Monday, $SK hynix (SKHY.US)$ The ADR fell by 9.3%, nearly erasing the 13% gain recorded on its debut last Friday, bringing the share price close to its IPO price of $149. Shares of peers including Micron Technology, SanDisk, and Western Digital also declined sharply, each dropping more than 4%.
Meanwhile, SK Hynix’s local shares in South Korea plummeted 15% on the same day—the steepest single-day drop in its history—dragging down the Korea Composite Stock Price Index (KOSPI) by 9% and triggering a market-wide circuit breaker. Foreign investors net sold approximately 17 trillion Korean won (about $11 billion) worth of KOSPI stocks that day, with the bulk of the outflow stemming from SK Hynix.
According to Yonhap Infomax, a South Korean financial news outlet, citing a senior SK Hynix executive, the company is exploring the possibility of purchasing South Korean government bonds. However, as of now, SK Hynix has not formally announced any such investment plan, and major international media outlets have not independently confirmed the report.
Under long-term supply agreements, expectations of a slowdown in HBM price growth have become the primary source of downward pressure.
The immediate trigger for this sell-off lies in the market’s reassessment of profit outlooks.
Minsook Chae, a semiconductor analyst at Korea Investment & Securities (KIS), issued a report forecasting that SK Hynix’s operating profit for the latest quarter could fall 8% below consensus estimates, noting the company’s high exposure to high-bandwidth memory (HBM) revenue, whose pricing—constrained by long-term supply agreements—is rising more slowly than that of conventional chips.
The KIS report circulated widely among trading desks, amplifying market pessimism. In the report, Minsook Chae further noted that the average selling price increase for HBM may undershoot expectations, with similar trends observed in hybrid and commodity DRAM chips. However, the analyst added that slower price growth is not necessarily negative but rather reflects the industry’s shift toward long-term contractual arrangements.
In an interview last Friday, SK Hynix CEO Kwak Noh-Jung stated that the shortage in memory chips could persist beyond 2030. However, as major memory manufacturers race to expand capacity, markets have begun to worry about the potential earnings impact if demand weakens in the future.
Following the ADR listing, a 'sell-the-fact' dynamic has dominated short-term price action.
SK Hynix's recent U.S. ADR offering raised $26.5 billion, setting a new record for overseas listings and attracting oversubscription of more than seven times the offering size. It has been viewed as a key barometer of market demand for overseas listings and the sustainability of the AI-driven rally. However, the initial listing enthusiasm failed to persist.
Chan H Lee, Managing Partner at Seoul-based hedge fund Petra Capital Management, stated:
"The ADR offering itself was highly successful, but most of the positive sentiment had already been priced into the stock. Monday’s weak performance largely reflected a classic 'sell-the-fact' reaction and profit-taking, rather than any fundamental deterioration."
Nico Rosti, analyst at MRM Research, noted that SK Hynix shares currently exhibit "deeply oversold" characteristics:
"Another week of declines is certainly possible, but we view this as an excellent opportunity to add to positions. Should the Korean equity market rebound, the ADR should follow suit with upward momentum."
Concentrated leverage in the Korean market exacerbates volatility.
This sharp drop in the Kospi index is not an isolated incident; it reflects deeper structural vulnerabilities within the Korean equity market. Following the AI boom, memory chip stocks significantly outperformed their global peers, substantially increasing market volatility—single-day swings of 5% in the Kospi have become increasingly common.
A surge in leveraged ETFs tracking SK Hynix and Samsung has further amplified price swings. Since their debut on the Seoul exchange in late May, some of the largest SK Hynix leveraged ETFs have fallen nearly 50% cumulatively. The Korea Exchange has triggered circuit breakers on the Kospi 13 times since 2000—seven of which occurred this year alone.
Nic Puckrin, cross-asset analyst and founder of Coin Bureau, wrote in a research report:
"SK Hynix’s near-record decline in Asian markets is no longer just a Korean issue—volatility is now being exported to the Nasdaq. The growing interconnectivity between these two markets is mutually reinforcing concentrated risks in tech stocks, creating a vicious cycle that investors must closely monitor."
Richard Tang, Head of Research at Julius Baer Hong Kong, stated that volatility is expected to remain elevated until late July, adding, "Initial outflows were linked to position concentration limits, while recent activity reflects both a technical rotation into ADRs and profit-taking in strongly performing memory stocks."
SK Hynix plans to redirect a portion of its ADR proceeds into South Korean government bonds.
According to Yonhap Infomax, a South Korean financial news outlet, citing a senior SK Hynix executive, the company is exploring the possibility of purchasing South Korean government bonds.
However, as of now, SK Hynix has not formally announced any such investment plan, and major international media outlets have not independently confirmed the report.
Previous media reports indicated that the company intended to repatriate a portion of the funds raised from last week’s ADR offering to invest in memory chip manufacturing facilities in Korea.
Editor/lambor