Storage chips truly are "cash-generating machines"! SK Hynix's $28 billion shopping spree in the credit bond market creates a "stock and bond rally" opportunity amid deleveraging and liquidation.

An unprecedented global investment boom in artificial intelligence is actively driving major technology giants around the world to raise billions of dollars through bond issuance. However, for at least one large chip manufacturer, its engagement with the credit market is not limited to bond financing. According to media reports citing informed sources, as cash reserves continue to grow, South Korean chip giant SK Hynix is expanding its investment scale in domestic corporate credit bonds. Several credit analysts and market participants estimate that SK Hynix has purchased related bond assets worth between 10 trillion to 40 trillion Korean won (approximately 7 billion to 28 billion USD) this year, with the upper end of the range also including commercial paper. The credit spread of South Korean AA-rated three-year corporate bonds relative to government bonds had widened to about 70.5 basis points in mid-July, reaching a two-and-a-half-year high. One reason for this was the previously observed capital flowing from the bond market to a booming stock market; subsequently, the stock market experienced a sell-off due to forced deleveraging from leveraged ETFs. In other words, the South Korean stock and bond markets are undergoing a dislocated phase characterized by bonds becoming cheaper due to funds being siphoned away and stocks becoming cheaper due to forced liquidations. On one hand, shares of Samsung and SK Hynix were mechanically sold off by leveraged ETFs and margin calls, while on the other hand, SK Hynix, benefiting from the boom in AI storage, is generating substantial cash and has become an important marginal buyer in the South Korean credit bond market. The influx of massive funds, similar to the scale of bonds allocated by SK Hynix, will directly increase the true buying demand for high-rated South Korean credit bonds, helping to compress credit spreads and improve liquidity in both the primary and secondary markets. Meanwhile, the South Korean stock marketdubbed the "barometer for AI computing power investments"also possesses conditions for a return from liquidity discount to the fundamental value of AI semiconductor firms, now that the size of leveraged ETFs is shrinking and forced selling is decreasing. Recently, global investors have resumed purchases of South Korean stocks, particularly on July 31 (Friday) when foreign net buying once reached 7.2 trillion won at the tail end of the deleveraging phase, while the size of leveraged ETFs dropped from around 50 billion USD to 17 billion USD, evidencing that the chip cleansing has begun to show results. AI storage profits have not worsened simultaneously but have concurrently left behind stocks with suppressed risk premiums due to forced liquidations and wide credit spreads on high-grade bondsindicating positive mean reversion potential on both ends. Stock valuations may see recovery, while credit bonds may experience narrowing credit spreads. If South Korean government bond yields stabilize or decline simultaneously, it will be easier for corporate bond prices to genuinely rise, resulting in a scenario of stocks up + bonds up; however, if South Korea's risk-free interest rates continue to rise, even if credit spreads narrow, the total yield on corporate bonds may not necessarily decrease, and bond prices might only outperform relatively instead of absolutely rising. From AI storage leader to major buyer in the South Korean bond market, SK Hynixs cash influx is spilling over According to informed sources, SK Hynix has recently released new internal recruitment positions to manage, strategize, and hedge the companys funds, including fixed income investments, with a scope ranging from government bonds and corporate bonds to short-term debt instruments. This further indicates that the company is becoming increasingly active in the bond market. Globally, it is not unheard of for corporations to phase their investments in the credit market when they have additional cash that needs to be allocated, but such activities are particularly noteworthy in a market typically dominated by institutional investors. Even as SK Hynix continues to increase capital expenditures, its investable funds have significantly accumulated. By the end of the second quarter, the companys cash and cash equivalents surged nearly 62% from the previous quarter, reaching 88 trillion won. A spokesperson for SK Hynix, when asked about related investment activities, stated, The company is evaluating various operational methods to ensure stable and efficient fund management. The spokesperson did not elaborate further. As shown in the figure above, SK Hynix's scalable liquid assets continue to grow. Note: Based on consolidated financial statements. Source: Regulatory filings. Demand for the company's high-bandwidth memory (HBM) storage system chips continues to surge, and SK Hynix raised 26.5 billion USD through last months record American Depositary Receipt listing (i.e., landing on the U.S. stock market via ADR). Even though the companys stock price has retreated from its June peak, it has still cumulatively increased by an astonishing approximately 460% over the past 12 months. Zhao Yongjiu, a fixed income analyst at Shinhan Investment Corp., stated, Typically, companies would deposit excess funds in banks. It is uncommon for a company to have such a large surplus of cash. Now that the fund size is so substantial, they are recruiting more employees who can manage a large investment scale. In April of this year, SK Hynix announced plans to continuously enhance shareholder returns through dividends, stock buybacks, and share cancellations by 2026. According to media reports citing informed sources, the company has purchased a wide range of bonds, including those issued by financial institutions and government-related securities. The aforementioned informed sources indicated that since around April, SK Hynix's bond subscription scale has significantly expanded. Individual order sizes typically range between 100 billion to 300 billion won. Its primary targets are investment-grade bonds rated above AA, usually short-term bonds with maturities of no more than approximately three years. In a publicly disclosed regulatory filing that did not detail the types of investments, SK Hynixs management previously stated that as of the end of March, the companys total short-term investment assets amounted to 14.9 trillion won. Senior credit analyst Kim Sang-in from South Korea's securities giant Shinhan Investment Corp. remarked, Without SK Hynix's capital inflows, the local credit market might have already encountered liquidity tightening. Considering the massive cash flow brought about by expected profits, if SK Hynix wishes to manage these funds in a stable manner, their available options seem primarily to include holding cash or investing in optimistically-rated bonds. Price dislocation from deleveraging, South Korean memory chip duopoly faces fundamental recovery window Memory chips are crucial for South Korean exports and the South Korean economy as a whole. South Korea is home to the worlds two largest memory chip manufacturersSK Hynix and Samsungwhere SK Hynix has been the core HBM storage system supplier to Nvidia in recent years. Another memory giant, Samsung, is the worlds largest supplier of DRAM and NAND storage chips and has recently also become a supplier of HBM for Nvidia, especially for the latters flagship AI computing cluser productsGB200/GB300 series. As breakthrough AI applications like AI agents penetrate various global industries and create unprecedented AI inference computing power demand, it signals that the future prospects for demand in AI chip, HBM storage systems, enterprise-level SSDs, as well as high-performance network and power equipment in AI computing infrastructure construction will be extraordinarily promising. Furthermore, the AI boom at the terminal side will usher in a new growth curve for consumer-level DRAM and NAND storage demand. With approximately 28 billion USD of funds entering the South Korean credit market, the most notable aspect is not how many bonds are bought but that the company has exhibited an extremely rare balance sheet statuscash generated by the AI storage supercycle has, in the short term, even outpaced the speed at which the company can effectively invest in productive assets. Official data for the second quarter shows that SK Hynixs cash and cash equivalents reached 88 trillion won, up by 33.6 trillion won; its liabilities are only 18.6 trillion won, corresponding to a net cash of about 69.4 trillion won, and the company plans to increase capital expenditures to more than 40 trillion won this year. In other words, even as it builds M15X, the Yongin cluster, and advanced packaging and HBM capacity, the company still has substantial liquidity that needs to be parked in AA-rated or above, three-year or shorter corporate bonds and short-term debts. This is not the typical high-leverage expansion seen at the peak of an ordinary cycle, but rather resembles a comprehensive overflow effect of profitscash flowreinvestment ability. In fact, Samsung and SK Hynix are expected to collectively hold about 263 billion USD in net cash by the end of the year, and the market has started demanding that both companies further translate the cash influx from AI into shareholder returns. The previous drastic declines in the South Korean stock market due to forced deleveraging by leveraged ETFs, margins, and momentum funds have formed a significant divergence from corporate cash flow fundamentals; this is at the core of what Goldman Sachs refers to as the market pricing the fundamentals as more pessimistic than reality. From an AI system engineering perspective, the biggest difference in this round of memory supercycle is that HBM/server DRAM/enterprise-level SSDs are transitioning from ordinary cycle commodities to becoming the physical bottleneck of AI computing systems. Elon Musk rarely commented on the storage market during SpaceX's Q2 2026 earnings call, stating that storage supply is growing at around 20% per year, but demand is increasing at rates as high as 200% or even more, leading to severe imbalances between supply and demand, with price increases being a fundamental economic law. SK Hynix CEO Kwon Oh-chul remarked during a July conference call that 2027 may become the tightest supply year in the history of the global memory industry, with customer demand exceeding the companys supply capabilities potentially continuing beyond 2030. Latest research indicates that the rebalancing mechanism of single-stock leveraged ETFs has significantly increased the volatility of Samsung and SK Hynix, meaning the earlier 39%-40% dips in the South Korean stock market (KOSPI index) cannot be interpreted in a proportionate manner as the collapse of the memory profit cycle. Therefore, if the supply-demand shortage of DRAM/HBM persists, and mechanical deleveraging has cleared out the weakest chips, then Samsung and SK Hynix are transitioning from high-valuation cyclical stocks back into essential AI infrastructure core assets that are wrongfully sold off due to liquidity issues but possess scarce supply + pricing power + substantial net cash.