South Korea’s SK Hynix has been on a roller coaster lately, but its position at the center of the AI boom has actually changed little.
On Wednesday, the memory giant’s Seoul-listed shares rose as much as 13% as its Nasdaq-listed American Depositary Receipts rose 27% overnight.
The rebound followed a sharp selloff earlier this week, extending the wild swings that have characterized trading since Friday’s blockbuster stock SK Hynix debuted on the Nasdaq.
Swinging is not just a matter of direction. It has also become clear that SK Hynix’s ADRs listed on Nasdaq are currently trading at about 35% higher than Korean ADRs, and the gap between SK Hynix’s U.S. and Korean listings is widening.
Some of that premium reflects ease of access rather than fundamental change.
The Nasdaq listing removes long-standing hurdles for many U.S. investors, including Korean payments, currency controls and investment obligation restrictions, said Scott White, an analyst at Singapore-based Yar Investments.
But it has also created unusual market dynamics, with early trading driven by a combination of “exceptional fundamentals, subdued volatile stocks, and crowded positioning across two markets with different investor bases,” White wrote in a note Monday.
Jing Jie Yu, equity analyst at Morningstar, said he expects ADRs to continue gaining footing given their limited trading history. This makes it difficult for investors to judge the appropriate premium for Korean stocks.
Leverage magnifies volatility
ADR premiums are not the only technical factor that affects stock prices.
Trading also expanded due to single-stock leveraged ETFs linked to SK Hynix. Following SK Hynix’s Nasdaq debut, a similar product was launched in the U.S., adding a new layer of momentum-based trading.
These market dynamics are unlikely to disappear anytime soon.
Morningstar’s Yu said he expected “tremendous volatility” in both SK Hynix’s ADRs and Korean stocks.
He added that unprecedented levels of private participation and margin borrowing are exacerbating volatility, and margin calls are likely to amplify selling during sharp pullbacks.
Despite the market turmoil, analysts have a mostly constructive view on SK Hynix.
South Korea’s KB Securities said the recent slump reflects growing concerns about a slowdown in AI investment. That’s despite the fact that “neither the long-term growth trajectory of AI nor the fundamentals of memory supply and demand have changed significantly from a month ago,” Jeff Kim, the company’s head of research, said Wednesday.
“Therefore, we believe the recent stock price decline reflects sentiment rather than fundamentals,” Kim wrote.