Is the TSMC of the memory world coming to Wall Street? The SK Hynix drama you probably haven't heard about.
While Wall Street is going wild over Micron's surprising earnings, headlines might be "missing" an equally interesting story, a story entirely related to Micron, and to the chip and memory market in general.
This is the story of Nvidia's most critical partner, the Korean company SK Hynix, which is exploring a US listing (ADR), and now is the time to understand this move.
This is perhaps simply a story about "pricing distortion" in the AI supply chain.
The equation? SK Hynix = TSMC
Let's try to make an equation, which might feel a bit outlandish at first.
To begin, we need to look at the competitive standing.
Just as TSMC holds a de facto monopoly on advanced chip manufacturing, SK Hynix has established itself as a "quality monopoly" in the memory market:
Absolute technological leadership: It's not just a memory manufacturer, it's the largest and most advanced company in the world in HBM (High Bandwidth Memory). While competitors are trying to catch up, SK Hynix is already there.
The indispensable partner: Every advanced Nvidia AI processor requires dedicated HBM. SK Hynix is Jensen Huang's primary and most dominant supplier – there is no Nvidia without SK.
Economic moat: The ability to produce HBM3e at high output (the company announced just last night the start of HBM4 production) is a huge barrier to entry, reminiscent of TSMC's barriers to entry in 3-nanometer manufacturing.
But despite being the leader, the market punishes it for being "foreign".
Note the following data: Micron Technology $MU (the American competitor) trades at a forward price to earnings ratio (P/E) of approximately 28.
While SK Hynix trades at a multiple of only about 11.
In other words, Micron trades at a premium of more than 100% over SK, even though it is technologically trailing.
This might sound illogical to you, but the reason is very simple:
Accessibility.
The big money in the US flows to Micron because it's "there," on the Nasdaq.
Think about it in the simplest way: Do you know anyone who trades on the Korean stock exchange?
We don't...
But we all invest in the American stock market, right?
That's all.
The real big money is in the US stock market, and exposure to investors from all over the world also affects pricing.
And that's why the Korean memory company is preparing for a US offering, hoping to close these pricing gaps.
How will this work?
According to reports from the banking industry, the company is in talks with investment banks to list approximately 2.4% of its shares (treasury shares) as American Depositary Receipts (ADRs) on the New York Stock Exchange.
Pay close attention to the move: the offering will not be carried out by issuing new shares that dilute investor holdings, but rather the company will buy back shares from investors (a buyback), and these shares will become depositary shares on the US stock exchange.
How is the offering expected to affect the stock price?
We talked about TSMC, let's take it as an example.
In 1997, TSMC made a similar move and was listed as an ADR on the US stock exchange.
The result?
Access to big money still supports the stock price, which trades at a significant premium over shares in Korea and Taiwan.
In addition, the stock entered ETFs that manage billions of dollars, such as $SOXX and $SMH. The meaning of this is passive money inflow through ETFs, which serve investors as an anchor within pension portfolios and large investment portfolios of giant investment funds.
And now we want you to use your brain a little more.
Think of yourselves as investors who want to invest, say, in chip manufacturing: would you choose Intel or TSMC?
You would probably prefer the familiar company, right?
Now think about investors who until today invested in "Intel" simply because they had no option to invest in the queen of the industry because it is Korean.
And suddenly, a plot twist: the Korean company is entering the US stock market?
Will we soon see a new ticker on Wall Street?
We will continue to monitor and update.