South Korean semiconductor and memory chip maker SK Hynix may not be a household name like SpaceX but, on Friday, it landed right behind the aerospace company as the second-biggest IPO Wall Street’s ever seen.
SK Hynix debuted with ADRs worth $26.5 billion (1) — a record for an international company that sits behind only SpaceX’s recent $85.7 billion offering as the largest ever (2).
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“The big difference here is [SK Hynix] actually have revenues and earnings, which I think is very important,” Art Hogan, chief market strategist at B. Riley Wealth, told Yahoo Finance when comparing the two IPOs (3).
He added that, given “revenues are exploding” in the memory chip and semiconductor realm, SK Hynix “have a fundamental argument to be made for the price that it trades at” whereas, with SpaceX, “you have to believe in a dream that goes out to 2030 that revenues are going to increase from $18 billion to $308 billion over that timeframe if everything goes well.”
SK Hynix opened with 177.9 individual ADRs priced at $149, with ten representing a common share (4).
The company replied to Moneywise’s request for comment by pointing to a press release that cited SK Hynix CEO Kwak Noh-Jung thanking investors and customers and promising to “push the boundaries of what memory can achieve while empowering our employees to reach even greater accomplishments.”
The previous record for an international company’s IPO, however, was held by Saudi Arabian oil company Saudi Aramco, which raised a then-record $25.6 billion in 2019 (5).
The memory and semiconductor boom behind SK Hynix’s blockbuster IPO
The SK Hynix IPO reflects a wider belief in the long-term growth potential of chip and semiconductor makers as the AI data center boom continues.
Reuters noted that SK Hynix’s stock is up 680% in Korea in the last year, with one industry analyst predicting overall market growth “from about $65 billion this year to $120 billion next year and about $290 billion by 2030 (6).”
Part of that growth is fuelled by what CNBC described as the big three memory companies — SK Hynix, Samsung and Micron — “using their market power to lock in prices and orders years into the future (7).”
On July 7, for example, SK Hynix and U.S. giant Nvidia announced a “multiyear technology partnership for next-generation memory” to help the continued buildout of Nvidia’s AI factories (8).
Chey Tae-won, chairman of SK Hynix’s parent company SK Group, said in a statement that they and Nvidia “have been building toward this for years,” adding that they’re “codeveloping the next generation of memory for AI factories and applying AI to how we design and manufacture semiconductors — work that will shape the future of AI infrastructure.”
Counterpoint Research memory semiconductor specialist MS Hwang told CNN (9) that Sk Hynix’s IPO gives the company “the firepower to out-scale Samsung, close the valuation gap with U.S. rivals such as Micron and secure the elite talent with attractive compensation and boost corporate morale (9).”
SK Hynix’s IPO success, meanwhile, is a high point in a long journey that began with the company’s founding in 1983 and subsequent peaks and valleys, including, as Bloomberg put it, a near-decade in the early 2000s “relying on creditor bailouts (10).”
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Keeping up with the boom
Despite SK Hynix’s IPO coming in second only to SpaceX, the Elon Musk-headed company does offer some warning about sustaining long-term momentum after the initial hype dies down.
SpaceX stock fell back to Earth, with Forbes noting a loss of 25% since its IPO debuted (11). The stock, which was trading at $200 at one point, hovered around $148 as of July 10.
Still, officials in South Korea are betting big on the future of memory chip and semiconductor needs and manufacturing.
Bloomberg reported that SK Group and Samsung are opening multiple new plants each in the country “to rapidly expand production capacity to meet increasing demand,” while the country itself is courting hundreds of billions more from other investors for data centers (12).
“We’re entering an era where the page turns in the blink of an eye,” the outlet quoted South Korean President Lee Jae Myung as telling reporters. “Speed is the only way to survive.”
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The Wall Street Journal (1); Reuters (2), (6); Yahoo Finance (3), (4); BBC (5); CNBC (7); NVIDIA News (8); CNN (9); Bloomberg (10), (12); Forbes (11)
This article originally appeared on Moneywise.com under the title: SK Hynix raises $26.5 billion in Wall Street’s second-biggest IPO ever, trailing only SpaceX
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