SK Hynix unveils record $28.9B buyback after chip stock slides

What's the deal? SK HynixDealroom has a profile for this one. Try Dealroom →, one of South Korea's leading chipmakers, said Wednesday it will buy back a record 40 trillion won ($28.9 billion) in shares to boost returns and support its stock after steep sector declines. The board approved a plan to repurchase and cancel treasury shares, saying the move aims to "reallocate capital efficiently and enhance shareholder value." It called its stock "undervalued relative to intrinsic value."

What does the company do? SK Hynix is a major producer of high-bandwidth memory (HBM) chips that power artificial intelligence applications. Its shares surged this year on soaring demand for those chips.

Why now? The stock fell about 50% in July after peaking in June, as investors grew worried that massive AI investments might not deliver returns as fast as hoped. Shares recovered in August but dropped 9.8% on Wednesday amid renewed jitters over tech stocks, rising inflation, government bond yields, and oil prices.

By the numbers: The company reported last month that second-quarter net profit jumped more than 1,200%, driven by strong demand for advanced AI chips. It also disclosed a five-year deal to supply $750 billion in memory chips to global tech giants, including Nvidia.

What's the endgame? The buyback follows a purchase of roughly 4.8 billion won in shares by SK GroupDealroom has a profile for this one. Try Dealroom → chairman Chey Tae-won in late July, seen as a signal of confidence. SK Hynix said it will keep weighing additional repurchases and cancellations, factoring in cash flow, market conditions, and distributable profits.

The signal: Record earnings at SK Hynix and domestic rival Samsung ElectronicsDealroom has a profile for this one. Try Dealroom → have fuelled optimism about South Korea's economy, with their advanced memory chips a core part of AI infrastructure. That strength helped push the Kospi index past a record 9,000 points in mid-June, before the tech selloff pulled it back — leaving the buyback as a bet that AI demand still has room to run.

Image credit: Generated with Gemini

Read more: Asharq Al-Awsat