A South Korean supplier of Nvidia is going public on the Nasdaq. What does this mean for its competitors?

South Korean company SK Hynix—the world’s second-largest manufacturer of memory chips and a major supplier to Nvidia—plans to raise approximately $29 billion on the Nasdaq through the issuance of American Depositary Receipts (ADRs). This could become the second-largest securities offering in history after SpaceX’s IPO, which took place in mid-June, Reuters notes.

SK Hynix plans to issue up to 17.79 million new ADRs, according to the company’s regulatory filings. The value of the securities could reach 45.45 trillion won ($29.4 billion), although the final amount may change depending on the results of the book-building process, Reuters reports. Trading on the Nasdaq is scheduled to begin on July 10.

Each ADR represents one share. SK Hynix plans to issue shares in South Korea and deposit them with the Korea Securities Depository, which will serve as the underlying asset for the ADRs, according to the Korea Economic Daily. According to the newspaper, the review by the South Korean regulator could be completed by July 3. Citigroup, JPMorgan Chase, Goldman Sachs, and Bank of America are acting as underwriters for the ADR listing, the Korea Economic Daily reported.

SK Hynix’s listing on a U.S. stock exchange is expected to be one of the largest overseas equity offerings, according to Bloomberg. It compares SK Hynix’s offering to Alibaba Group’s 2014 IPO, which was the largest in history at the time.

SK Hynix shares rose about 1% during trading in South Korea on June 24. Since the beginning of the year, they have soared by nearly 300%, as a boom in the construction of data centers for artificial intelligence is driving demand for memory chips, according to Barron’s.

The development of AI has triggered a global semiconductor shortage, as high-performance systems consume vast amounts of standard DRAM to create what is known as high-bandwidth memory (HBM), according to CNBC. According to Min Su Huang, research director at Counterpoint, SK Hynix controls about 60% of this market.

“What’s clear is that SK Hynix is definitely a top-tier player in the HBM segment. And it has a more favorable cost of production. That’s why its operating margin is the best. So, it has the best product and the lowest cost. What more do you need?” Huang said in an interview with CNBC on June 17.

Analysts also noted that the U.S. listing could help narrow the valuation gap between SK Hynix and U.S. semiconductor manufacturers by raising the company's profile among global investors, according to Bloomberg.

SK Hynix plans to allocate all of the capital raised toward building factories and purchasing machinery and equipment. Increasing memory chip production will allow the company to boost its competitiveness by lowering the prices of its products, according to Barron’s. In addition, the ADR offering will give Wall Street another way to profit from the boom in the memory chip segment. In this regard, some investors may decide to diversify their holdings in the sector or completely divest themselves of shares in competitors such as Micron in order to redirect capital toward SK Hynix’s more promising securities, the publication notes.

This article was AI-translated and verified by a human editor