US investors to gain access to SK Hynix through $28 billion IPO

South Korean memory chipmaker SK Hynix, rival to Samsung and U.S.-based Micron, is planning to sell nearly 17.8 million shares in a U.S. IPO, the company said on Monday. Should its shares sell well, the company could raise around $28 billion, based on SK Hynix's closing share price last Friday in Seoul, Bloomberg reports.

SK Hynix will be offering American depositary receipts (ADRs), a type of certificate that lets U.S. investors buy a foreign stock without trading directly on an overseas exchange. Each ADR will represent a tenth of a common share.

It is expected to price those securities on Thursday and begin trading on Friday. Like Micron, SK Hynix is riding an AI-fueled boom credited to AI in both sales and stock price. Its first quarter revenues were up nearly 200% over the same quarter last year, it said, and its stock is up about 260% so far this year.

This is because systems that run AI are very memory intensive. As hyperscalers like Amazon, Microsoft, Google, and Oracle race to build out so-called AI factories, and as new AI data centers multiply nationwide, demand has outpaced supply, creating a shortage of memory chips — including High Bandwidth Memory (HBM), DRAM, and NAND. The situation has been called “RAMageddon.” Apple executives said the shortage is forcing it to raise prices on Mac computers and iPads.

South Korean tech companies, led by SK Hynix and Samsung, have vowed to spend over $550 billion on building out new manufacturing capacity to keep up. That’s actually a risky venture. By the time those facilities are built, memory needs for AI may change, leaving them with more supply than the market wants and, potentially, crashing prices.

But for now, Wall Street is looking for another Nvidia and memory chip makers are among the closest options that they have. Micron, the closest U.S. comparison, has shot up nearly 700% over the past year to a more than $1 trillion valuation, fueled by record AI-driven memory demand and revenue.

Why this matters: The impending IPO of SK Hynix is a significant indicator of the growing importance of AI in the tech industry. As demand for memory chips continues to outstrip supply, companies like SK Hynix and Micron are reaping the benefits. However, the planned massive investments by South Korean tech companies to ramp up production pose risks, including potential oversupply and price crashes.

For developers and businesses, this means that the cost and availability of memory chips could have a major impact on the development and deployment of AI systems. For consumers, it may lead to higher prices for AI-enabled devices like Mac computers and iPads. The question now is whether these investments will pay off, and what the long-term implications will be for the industry and the broader economy.