Cramer flags SK Hynix risks ahead of Nasdaq ADR debut

SK Hynix is scheduled to begin trading on the Nasdaq on Friday through American depositary receipts, giving U.S. investors a more direct route into the South Korean memory-chip maker. CNBC’s Jim Cramer said Thursday that the listing offers exposure to artificial intelligence-related demand for high-bandwidth memory, while carrying the cyclicality that has long defined the memory market.

The planned U.S. listing comes through ADRs, securities issued by a depositary bank that represent shares in a foreign company. ADRs trade on U.S. exchanges in dollars, which can make ownership simpler for U.S.-based investors than buying shares on an overseas exchange.

CNBC reported that the offering is roughly $26.5 billion and is expected to rank among the largest on record, following large recent deals involving Cerebras and SpaceX. SK Hynix’s South Korea-listed shares have risen about 2,550% since OpenAI’s ChatGPT was released in November 2022, according to CNBC, lifting the company’s market value above $1 trillion.

Cramer said on CNBC’s “Mad Money” that the stock still appears inexpensive relative to earnings despite that advance, citing a valuation of a little more than seven times this year’s earnings. He said SK Hynix’s memory chips command premium prices, while the equity trades at a discounted multiple.

AI demand meets a cyclical chip market

The case for SK Hynix, as described by Cramer, depends on continued capital spending tied to artificial intelligence and the resulting need for advanced memory. High-bandwidth memory is used alongside AI processors to move large volumes of data quickly, making it a key component in systems built for training and running AI models.

Cramer cautioned that memory chips have historically followed boom-and-bust cycles. In those cycles, high prices and tight supply can encourage capacity expansion, and profits may come under pressure when new supply catches up with demand. He said the central question for investors is whether AI has changed that pattern in a lasting way.

Recent trading has shown the pressure on the sector. CNBC reported that SK Hynix shares are down about 25% from their June 25 high, as memory stocks have sold off more broadly. Samsung and Micron have also been affected by the pullback, even after reporting strong earnings, according to CNBC.

Cramer said the decline means buyers would not be entering at the stock’s recent peak, but he also characterized the shares as highly volatile. He said investors who want exposure should consider a small position and retain capacity to buy if the stock weakens, framing the trade as suitable only for those willing to accept volatility.

The listing will broaden the range of U.S.-traded securities tied to the AI infrastructure trade. For SK Hynix, the market test will be whether investor appetite for AI-linked memory can outweigh concern that supply growth may eventually erode the margins created by the current demand surge.

This story draws on original reporting from CNBC.