In a significant milestone for the South Korean tech industry, SK Hynix has reached a market valuation exceeding $1 trillion, joining the ranks of fellow memory chip manufacturers Samsung Electronics and Micron Technology. This achievement marks a notable AI-driven rally for the company, with its shares closing up by 9.3% after peaking at a 14.9% increase during trading, bringing its total market value to approximately 1,680 trillion won, or about $1.12 trillion. This surge has also propelled the KOSPI index to new heights.
The robust demand for high-performance memory chips, particularly those utilized in AI applications like those produced by Nvidia, has exacerbated supply shortages and driven prices upwards, benefiting major semiconductor producers. In fact, memory chip prices doubled in the first quarter compared to the prior period, with projections indicating a further increase of up to 63% in the current quarter due to the heightened demand in AI data centers. This surge in demand is impacting supplies for smartphones, laptops, and automobiles, leading to record profits for leading memory chip manufacturers.
Among the three Asian companies that have achieved a market value of $1 trillion, South Korea stands out as the first nation outside the U.S. to have more than one firm reach this benchmark. With this recent development, SK Hynix joins Samsung and Micron in the trillion-dollar club, capitalizing on the AI boom.
The KOSPI has seen impressive gains, attributed largely to these chipmakers, with the index rising 2.3% to 8,229.70 and even peaking at an all-time high of 8,457.09 earlier in the day. Notably, this remarkable performance led to a “sidecar” curb temporarily halting algorithmic trading due to the significant uptick. Currently, Samsung and SK Hynix represent half of the KOSPI index market capitalization. The index, having risen 95% year-to-date, follows a 76% increase last year.
Analyst Kim Young-gun from Mirae Asset Securities predicts that demand for memory chips will continue outpacing supply until 2028, keeping prices elevated. Consequently, target prices for SK Hynix and Samsung have been upgraded by 18.8% and 14.6%, respectively.
On Wednesday, SK Hynix shares closed at 2.243 million won, while Samsung shares increased as much as 8% and finished the day 2.7% higher at a record 307,000 won. This increase came after South Korean unionized workers approved a provisional wage deal, averting a potential strike that could have disrupted global chip supplies.
UBS recently announced it has significantly raised its target price for Micron, driven by the transformative impact of AI on the memory market. Year-to-date, Samsung shares have skyrocketed by 149%, SK Hynix shares have surged 215%, and Micron shares have soared by 245%.
In a further indication of this growth, U.S. retail investors have poured billions into a new exchange-traded fund (ETF) focused on Samsung and SK Hynix. The debut of the first South Korean single-stock leveraged ETFs linked to these companies saw impressive double-digit gains as semiconductor stocks soared. An analyst at Shinhan Securities pointed out that leveraged ETF buying leads to increased futures prices, which in turn escalates spot purchases, contributing to the KOSPI's increased volatility.
Agreements for retail trading surged, with financial investment firms purchasing 1.3 trillion won worth of KOSPI shares, while retail investors added another 403 billion won. However, foreign investors were net sellers during the session. The Korea Financial Investment Association noted that its website temporarily went offline due to the surge in retail investor activity seeking to enroll in courses for leveraged ETF investments.
As trading closed, a stark contrast was noted on the KOSPI index, with only 75 out of 918 regular shares advancing while 826 experienced declines.
