The biggest foreign company IPO in the US stock market is coming: SK Hynix is set to debut on Nasdaq to attract global incremental funds, will it lead to a price increase for the company?

This week, SK Hynix's $29 billion US stock market listing plan may become the largest foreign company IPO in history, but this is not only to raise funds, but also to compete in the hottest field in the global stock market - memory chips for artificial intelligence (AI) computing. For years, the South Korea-based semiconductor manufacturer's share price has been lower than its main US competitor, Micron Technology, Inc. (MU. US). As manufacturing companies for memory chips and other devices used in AI data centers are currently driving the performance of the Standard & Poor's 500 Index, SK Hynix may benefit from listing on the world's deepest stock market and the enthusiasm for all things related to artificial intelligence, which may help change this undervaluation situation. Daniel Morgan, Senior Portfolio Manager at Synovus Trust Co., which holds Micron stock, said, "We are in an era of extreme frenzy for chip stocks." "Now is the time to let SK Hynix join your stock along with the Hershey Company in the US." For most US investors, betting on SK Hynix has always been very difficult, even impossible. This year, Micron became the second best performer in the S&P 500 Index with an amazing increase of 242%, and like Micron, SK Hynix also benefits from the soaring demand for high bandwidth memory (HBM) chips. However, holding SK Hynix's shares listed in South Korea means trading them outside of US business hours. Another option is to purchase unsponsored American depositary receipts (ADRs) on the over-the-counter market (OTC) for companies that are not sponsored. These unsponsored ADRs not only perform less well than SK Hynix's shares listed in South Korea, but their liquidity is severely limited, making trading them a challenge. SK Hynix is expected to debut on the Nasdaq on July 10, which should change this situation and improve the team's lagging valuation. The trading price of this South Korean company is 6.2 times its expected earnings for the next 12 months. After a 14% stock plunge last week (the worst performance since March), Micron's current price-to-earnings ratio is 7 times, but on June 22, it was over 11 times. SK Hynix's share price has long been lower than that of Micron Technology, Inc. Di Zhou, Portfolio Manager at Songberg Investment Management, which holds SK Hynix stock, said, "This offering is aimed at investors who currently cannot enter the South Korean stock market." "SK Hynix's listing on the Nasdaq provides an opportunity to directly and without friction participate in one of the most attractive pure targets in the AI memory cycle." In the past 12 months, the shares of SK Hynix listed in South Korea and Micron have both risen by about 700%, pushing the market value of both companies to over $1 trillion. This surge in memory and storage companies is not an isolated case. During this period, SanDisk led the S&P 500 Index, soaring 3,676%, while Western Digital Corporation rose by 719% and Seagate Technology Holdings PLC surged by 449%. Overall, the Philadelphia Semiconductor Index rose by 125% in the past 12 months and just recorded its best quarter performance ever. Is the good cycle always there? But investors are becoming increasingly concerned about how long this good cycle can last. Tech giants driving much of the demand for memory (including Alphabet Inc. and Microsoft Corporation) are increasingly turning to debt and equity markets to fund their capital expenditures, whereas not long ago, these expenditures came from their cash reserves. These capital expenditures have propelled the profit of memory chip manufacturers to new heights. However, if this faucet is turned off, the entire dynamic will change. Ed Okun, CEO of River Wealth Advisors, said, "Investors are risking stepping into a potential speculative bubble." "You have to be very careful investing in something that has been rising all the way like these stocks." At the same time, SK Hynix's ADR will undoubtedly attract many US investors seeking more ways to bet on the biggest beneficiaries of AI spending. "There are many people who have no position in this area, so its listing may attract those who have not yet bought in," said Kim Forrest, Chief Investment Officer and Founder of Bokeh Capital Partners, which holds Micron stock. Due to some differences in governance around ADR listings, she plans to avoid participating in this offering, but she expects many peers to line up to vie for a share. SK Hynix is forecasted to achieve a net profit of 221 trillion Korean won ($144 billion) and sales of 355 trillion Korean won ($231 billion) by 2026, representing growth of 415% and 265% from 2025. In its current fiscal year ending on August 31, Micron is expected to see its net profit soar by 876% to about $83 billion and its sales jump by 247% to $130 billion. To keep up with demand, SK Hynix is planning to spend billions of dollars to build two production facilities in South Korea, as is its rival Samsung Electronics. The issuance of SK Hynix will help provide funds for these commitments. However, increasing capacity also brings concerns that potential oversupply may occur in the future if demand cools down. The memory industry is notorious for its cycles of boom and bust. Just three years ago, both Micron and SK Hynix suffered losses due to a sharp drop in demand that caused memory chip prices to plummet. One clear benefit of this offering is that it will provide SK Hynix with the opportunity to be included in US stock indices, which will attract buying from passive management ETFs tracking these benchmarks. For example, the Invesco QQQ Trust series, known for its stock code QQQ, which tracks the tech-heavy Nasdaq 100 Index, has $482 billion in assets. Arbitrage Opportunities Wall Street bulls view the deeper pool of funds, the ability to trade stocks during regular market hours, and the eventual inclusion in the Nasdaq 100 Index as reasons to be optimistic about this ADR. More importantly, the listing in the US will attract hedge funds seeking to trade on the valuation differences between Nasdaq-listed ADRs and stocks listed in Seoul - a strategy previously used in the listings of Alibaba Group Holding Limited Sponsored ADR and Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. The trading price of Taiwan Semiconductor ADRs is higher than that of local stocks. "Due to the presence of cross-market structures, there may be premiums and discounts between the two," said Brendan Ahern, Chief Investment Officer at KraneShares, which holds Micron stock. "This will attract arbitrage players and enhance stock liquidity." It is currently unclear whether investors will be able to freely exchange SK Hynix's ADR for South Korean stocks, a feature that may determine whether price differences will persist and how arbitrageurs will construct their trades. Full convertibility will allow investors to exchange these securities and keep prices closely aligned, while restrictions may allow US-listed stocks to continue to enjoy a premium. This dynamic is playing out in Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADRs, with the ADRs averaging a premium of over 21% over local prices in the past year, currently at around 13%. Perhaps most importantly, investors will focus on SK Hynix's ability to narrow the valuation gap with Micron. This offering may be attractive to US investors, ranging from pure long portfolio managers seeking to increase exposure to memory stocks in the midst of a booming stock market, to hedge funds focused on IPOs and other types of stock issues. Daniel Morgan of Synovus Trust holds a small amount of SK Hynix through over-the-counter depositary receipts and is curious about the new ADR, but is taking a wait-and-see approach when it comes to any purchases. "It will be a very popular target," he said. "We have to let it officially start trading and then take the next step based on that."