SK Hynix decided to calm the market by buying back $29 billion in shares following a drop in its stock price

South Korea's SK Hynix, the main supplier of memory chips to Nvidia, announced a 40 trillion won ($29 billion) buyback of its shares traded on the Seoul Stock Exchange. This will help support the stock price after it fell by more than 50% over two months. On August 19, the company’s shares rose 2.3% in New York, although they had plummeted nearly 10% during trading in Seoul, which ended before the buyback announcement.

From August 20 through November 19, the chipmaker will purchase up to 24 million shares and retire them. SK Hynix has also pledged to return more than half of its total free cash flow for 2025–2027 to shareholders. Previously, the company had planned to return no more than 50% to shareholders. By the end of the year, it may announce additional payments to shareholders, including a special dividend.

“The size of the buyback is a strong signal from SK Hynix, delivering what investors have long been calling for: the use of growing cash reserves and increased returns for shareholders,” said eToro analyst Josh Gilbert, as quoted by Bloomberg.

The decision to buy back shares came just one month after the company’s U.S. IPO, which raised $26.5 billion for SK Hynix, according to Bloomberg. The offering coincided roughly with the peak of interest in AI, but investors subsequently began to doubt that the current level of spending on neural network hardware would be sustainable in the long term.

The announcement of the share buyback may be partly intended to please retail investors in South Korea, Bloomberg reports, citing analysts. SK Hynix’s U.S. IPO sparked discontent among market participants in Seoul: the company issued new shares for the listing rather than using existing shares. As a result, shareholders’ stakes in the Korean market were diluted.

One of the goals of SK Hynix’s listing in New York was to make it easier for foreign investors to access the company’s securities. According to Sanjiv Rana, an analyst at CLSA Securities Korea, SK Hynix also expected that the issuance of American Depositary Receipts (ADRs) would boost the valuation of its shares in Seoul. This expectation has not yet been met: at the close of trading on August 18, the ADRs were trading at a 40% premium to the Korean shares.

Despite a spike in volatility among AI chipmakers’ stocks, most stock market analysts remain positive about SK Hynix, according to data from S&P Global cited by MarketScreener. Of the 39 experts covering the South Korean chipmaker’s stock, 38 recommend buying it (Buy rating) or expect it to outperform the market (Outperform). The average target price calculated by S&P implies a 91% increase in SK Hynix’s stock price over the next year.

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