SK Hynix Nasdaq listing tests valuation gap with global chip peers

SK Hynix is scheduled to start trading on Nasdaq on Friday through American depositary receipts, bringing one of the main suppliers of artificial intelligence memory chips to a larger pool of US investors. The listing comes with the company valued at 4.8 times 12-month forward earnings, according to LSEG data cited by CNBC, well below an industry median of 29.84 times and Micron Technology’s 6.6 times.

The debut will test whether wider access can reduce the valuation penalty often described as the “Korea discount.” The term refers to the tendency of South Korean companies to trade at lower multiples than comparable global businesses, with investors often citing corporate governance concerns and the ownership structures of large conglomerates.

SK Hynix is already a leading producer of high-bandwidth memory, or HBM, a type of memory used in AI accelerators. Even so, analysts cited by CNBC said the company’s shares have traded below some peers partly because many overseas funds have found Korean equities harder to buy and follow than US-listed stocks.

Rolf Bulk, head of semiconductors and infrastructure at Futurum Group, told CNBC that the ADR listing could help reduce the gap, although he said it was unlikely to eliminate the Korea discount altogether.

Access and listing standards

American depositary receipts give investors a US-traded instrument linked to a foreign company’s equity. In SK Hynix’s case, analysts told CNBC that the structure could matter as much for market access as for the money raised.

SK Hynix priced the ADRs at $149 each, according to company information cited by CNBC, and the offering was oversubscribed. CNBC reported that the transaction would raise about $26.5 billion.

Ji Cheong, associate director at S&P Global Ratings, told CNBC the proceeds would help fund part of SK Hynix’s expanding capital expenditure. S&P Global Ratings forecasts annual capex of 50 trillion won to 70 trillion won over the next two years, while Cheong said most funding is expected to come from the company’s own cash generation. Cheong added that SK Hynix is expected to produce more than 200 trillion won in annual operating cash flow across the next two years.

Peter Kim, global investment strategist at KB Financial Group, told CNBC that a Nasdaq listing should make SK Hynix easier for global investors to trade. He said the company still trades at a discount to the KOSPI, Micron and Samsung, and that Nasdaq listing requirements could address some US investor concerns.

Nasdaq rules require listed companies to meet financial and liquidity tests, including minimum levels for market value, public float, shareholder count and share price. Companies on the exchange also face governance standards covering audit committees, independent directors and shareholder voting rights.

HBM lead faces supply pressure

The US listing also arrives as investors assess how long SK Hynix can maintain its position in HBM. LSEG data cited by CNBC showed Micron shares have risen nearly 250% this year, while SK Hynix shares have gained 240%.

Philip Wool, lead portfolio manager at Rayliant, told CNBC that SK Hynix’s success in HBM has left it constrained by demand that exceeds available supply. He said that has given Samsung Electronics and Micron an opening to invest in rival products and secure supply agreements with hyperscale customers seeking more than one AI chip supplier.

Bulk told CNBC he expects SK Hynix to remain the largest HBM supplier, though its share could fall from about 57% last year to roughly 50% this year and then to the low-40% range over time as competitors gain ground. He said the larger issue is whether producers can add enough capacity to meet demand, adding that announced fabrication expansions are still not enough to satisfy expected demand through the end of the decade.

This story draws on original reporting from CNBC.