Can SK Hynix Escape Chipmaking’s Cyclical Curse After Nasdaq Debut?

The only thing more in-demand than SK Hynix memory chips? Demand for SK Hynix Nasdaq-listed stock.

The premier South Korean memory chipmaker, which already trades on the Korea Exchange, makes its US debut today, and investors are so desperate to get another piece of the company that it’s arriving more than seven times oversubscribed, according to a Bloomberg report. Now, one big question remains: Can the company break free from the sector’s historically cyclical nature?

The Cycle of Life

The American Depositary Receipt (ADR) listing comes just as investors are starting to let a little air out of their big bet on the memory sector. Fellow Korean memory chipmaker Samsung, whose shares rose roughly 150% this year before Tuesday, lost about 10% of its value after a blowout earnings report showing operating profit roughly 19 times higher than a year ago. Micron, the other member of the Big Three memory chipmakers, is similarly up 217% year-to-date … and down some 17% from an all-time peak on June 25. Korean-listed shares of SK Hynix have posted almost exactly the same rise and fall, down 25% from an all-time peak on the same day as Micron.

Some of the selloff was likely in anticipation of SK Hynix’s US arrival, but it has nonetheless been big enough to send South Korea’s benchmark KOSPI index into bear territory. That might alarm recent tourists to the memory trade, but longtime residents are quite familiar with the bust following the boom. For SK Hynix, whose founder called its product “industrial rice,” it’s baked into the entire value proposition:

• Despite the prolonged share price rally, SK Hynix is still priced at about 7 times forward earnings. Though that figure could tick up slightly after the Nasdaq listing, it will still be firmly in the territory of a value stock rather than the high-flying growth stock that its revenue and profit explosions would make it seem.
• That modest price-earnings ratio is consistent across the sector, reflecting the risk of a cyclical downturn. Samsung, for instance, trades at a forward price-earnings ratio of about 6, while Micron has edged up this year to about 11; the S&P 500 trades overall at about 20, according to LSEG Datastream.

Sooner … or Later: But if the world believes a memory sector downturn is a matter of when more than if, even in the AI age, no one can quite agree on how to set the countdown clock. Analysts expect SK Hynix to pull in $150 billion in net income this year. Revenue may triple this year and continue increasing through at least 2030, according to FactSet data, suggesting that a downturn may still be a ways away. The only thing that is certain? The best time to buy that new laptop or Nintendo Switch 2 was yesterday.