South Korea’s SK Hynix unveils record US$28.9bil share buyback

Seoul's SK Hynix, a leading chip manufacturer, announced on Wednesday a record US$28.9 billion share buyback as it navigates the challenges posed by the growing AI investment concerns. The company, a major producer of high-bandwidth memory chips crucial for AI tools, has witnessed its shares surge this year due to the surging demand for semiconductors.

However, after peaking in June, the shares dropped by nearly 50% by mid-July due to worries that the massive investments in AI might not yield early returns. Following the recent decline, SK Hynix's shares dipped 9.8% on Wednesday as market participants grew jittery over inflation, government bond yields, and oil prices. In a regulatory filing, the company's board approved the plan to acquire and cancel ₩40 trillion worth of treasury shares to optimize capital allocation and enhance shareholder value.

The board opined that the company's shares were undervalued based on its intrinsic worth. The record profits generated by SK Hynix and its domestic peer Samsung Electronics, both essential players in the fast-growing AI sector, have spurred optimism about South Korea's economic prospects this year. The gains in the two firms lifted South Korea's Kospi index to a record high above 9,000 points in mid-June, before the tech rout dampened the rally.

The share buyback follows SK Group Chairman Chey Tae-won's purchase of around ₩4.8 billion worth of his shares in late July, which was interpreted as a confidence boost for the company. SK Hynix has indicated its intention to consider further share buybacks and cancellations, keeping an eye on cash flow, market conditions, and distributable profits.

The firm disclosed in late July that its net profit surged over 1,200% in the second quarter, a result of the surging demand for AI-related advanced chips. SK Hynix also unveiled plans for a five-year supply agreement worth US$750 billion with global tech giants, including Nvidia, to cater to the burgeoning demand for memory chips.