SK Hynix, the South Korean memory chip maker that competes with Samsung and Micron, said Monday that it plans to sell roughly 17.8 million shares in a U.S. initial public offering. If the shares sell well, and early signs indicate they will, the company could raise about $28 billion based on its closing share price last Friday in Seoul, according to Bloomberg.
The company will offer American depositary receipts, or ADRs, which are certificates that allow U.S. investors to buy a foreign stock without trading directly on an overseas exchange. Each ADR will represent one-tenth of a common share. Pricing is expected Thursday, and trading is scheduled to begin Friday.
Riding the AI memory boom
Like its American rival Micron, SK Hynix is benefiting from a surge in demand driven by artificial intelligence. That boom has lifted both sales and stock prices. In the first quarter, SK Hynix reported revenue that was nearly 200% higher than the same period last year. Its stock is up roughly 260% so far this year.
The reason is that AI systems require large amounts of memory. Hyperscale cloud providers such as Amazon, Microsoft, Google, and Oracle are racing to build so-called AI factories, and new AI data centers are multiplying across the United States. Demand has outpaced supply, creating a shortage of memory chips, including High Bandwidth Memory, DRAM, and NAND. These are the different types of chips that store and move data inside AI systems. Industry observers have dubbed the situation "RAMageddon." Apple executives have said the shortage is forcing the company to raise prices on Mac computers and iPads.
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Big investments and big risks
South Korean tech companies, led by SK Hynix and Samsung, have pledged to spend more than $550 billion on building new manufacturing capacity to keep up with demand. But that comes with considerable risk. By the time those factories are completed, memory requirements for AI may have changed, leaving the industry with more supply than the market wants and potentially causing prices to crash. For now, though, Wall Street is searching for the next Nvidia, and memory chip makers are among the closest options available.
Micron, the closest U.S. comparison, has seen its stock rise nearly 700% over the past year, giving it a valuation of more than $1 trillion. That growth has been fueled by record AI-driven memory demand and revenue.