SK Hynix bucks AI stock selloff on $12bn dividend speculation

Shares in SK Hynix, a South Korean chipmaker, surged on Monday, bucking a broader decline in AI-related stocks, according to Bloomberg. The company reportedly is considering a $12 billion special dividend, a portion of its substantial gains on its investment in Japanese memory chipmaker Kioxia Holdings. SK Hynix plans to distribute roughly 16 trillion won ($12 billion) to shareholders, nearly equivalent to the 20 trillion won gain its Kioxia stake accumulated during the first half of the year.

The potential dividend might be disclosed alongside the company's third-quarter earnings announcement on Wednesday, possibly in installments, according to South Korean media. Although SK Hynix shares rose up to 3% in Seoul before scaling back, rival Samsung Electronics dropped as much as 1.9% and Kioxia fell by 3.7%. The divergence in stock performance comes as investors grapple with the sustainability of the AI investment boom, driven by rising debt levels among data center operators and heightened capital expenditure commitments, leading to a reduction in exposure to AI-linked equities.

Some analysts, such as Kim Namho from Timefolio Asset Management, view the potential dividend, coupled with SK Hynix's planned withdrawal of its US listing for its Solidigm subsidiary, as a short-term boost to the stock but do not expect it to trigger a sustained rally. Despite growing skepticism about AI infrastructure spending, major memory manufacturers like SK Hynix, Samsung, Micron Technology, and Kioxia are persistently expanding production capacity, backed by multiyear supply agreements with tech giants like Meta and Amazon.

SK Hynix acquired Kioxia through a Bain Capital-led consortium that purchased Toshiba's memory chip operations for $18 billion in 2018; Kioxia's valuation surged following its listing on the Tokyo Stock Exchange in 2024, yielding significant gains for its investors. Bain exited its remaining stake in Kioxia earlier this year, while SK Hynix retains convertible bonds equivalent to around 14% of Kioxia's equity.