SK hynix unveils record $28.9 bn share buyback

South Korean chipmaker SK hynix announced on Wednesday a record $28.9 billion share buyback as the company seeks to reassure investors amid ongoing concerns about the AI investment boom. The company, a major producer of advanced high-bandwidth memory (HBM) chips utilized in artificial intelligence systems, has witnessed a surge in its share prices this year due to the increased demand for these crucial semiconductors.

However, after reaching a peak in June, the shares plummeted by approximately 50 percent by the end of July, following a widespread sell-off in the sector. This decline was fueled by worries that the substantial investment poured into the AI industry might not yield significant returns as anticipated, if at all.

Though the company experienced a slight recovery in recent weeks, SK hynix shares fell 9.8 percent on Wednesday as market sentiment soured once again due to rising inflation, soaring government bond yields, and increasing oil prices. In a regulatory filing, SK hynix's board of directors approved a plan to purchase and cancel approximately 40 trillion won worth of treasury shares, aiming to optimize capital allocation and enhance shareholder value.

The company stated that its shares were "undervalued" relative to their intrinsic worth, indicating confidence in the long-term potential of the business.

Positive earnings from SK hynix and its domestic rival Samsung Electronics, whose advanced memory chips are fundamental to the rapidly evolving AI sector, had previously bolstered optimism about South Korea's economic outlook. This optimism contributed to a record high for South Korea's benchmark Kospi index, surpassing 9,000 points in mid-June. However, the tech sector's subsequent downturn has now put pressure on these gains.