In a week marked by volatility for AI-related stocks, the standout event was not an earnings report but a massive share sale. SK Hynix (NASDAQ:SKHYV, switching to NASDAQ:SKHY on July 13) successfully raised $26.5 billion through an American depositary receipt (ADR) offering, with demand exceeding supply by more than seven times. The ADRs closed Friday at $168.01, up 12.8% from the offering price of $149. The broader market also saw gains, with the Nasdaq Composite rising 1.7% and the S&P 500 adding 1.2% for the week.
The scale of the offering is notable. At $26.5 billion, it was 2.3 times larger than the $11.49 billion that flowed into global technology funds during the week ending July 8. It also surpassed the $24.97 billion that entered all U.S. equity funds during the same period. While these figures are not directly comparable—primary market deals involve new stock issuance, while fund flows track pooled investment money—they both underscore the strong pull of the AI supply chain. Technology fund inflows jumped approximately 29% from the previous week.
The focus is now shifting from processors to memory chips. High-bandwidth memory (HBM), which sits alongside graphics processors such as those made by Nvidia (NASDAQ:NVDA), is critical for feeding data quickly to AI chips. SK Hynix CEO Kwak Noh-jung told Reuters, "Our customer demand continues to go up, while our capacity has limitations," adding that demand could outpace supply even after 2030. This sentiment is driving a wave of capital investment in the memory sector.
Micron Technology (NASDAQ:MU), SK Hynix's primary U.S. competitor, announced it has increased its planned U.S. investment to more than $250 billion by 2035, a jump of at least $50 billion from its previous target. Shares of Micron rose 4.5% on Thursday, helping the Philadelphia Semiconductor Index bounce back 3.06%. "This is still very much an AI bull market," said Ross Mayfield, investment strategist at Baird.
Despite the positive sentiment, the week was not without its challenges. Micron shares slid 4.7% on Tuesday, and the semiconductor index dropped 4.65%. Samsung Electronics (KRX:005930) posted record profit, but investors were underwhelmed. Zachary Hill, head of portfolio management at Horizon Investments, noted that expectations had become "almost impossible to beat" after the sector's significant rally.
Valuation played a key role in investor appetite for the new SK Hynix shares. The stock trades at about 5.8 times expected earnings for the next year, compared with Micron's 7 times—a discount of roughly 17%. Giuseppe Sette, co-founder of Reflexivity, described SK Hynix as the "purest large-cap way for U.S. investors to own the AI-memory theme."
Goldman Sachs (NYSE:GS) reported that its clients cut U.S. tech hardware stocks for a fourth consecutive week through July 3, during which the semiconductor index fell 4.2%. However, fresh fund inflows and the successful SK Hynix offering suggest continued support from conventional funds and primary-market buyers, even as leveraged players pull back.
The shortage trade carries inherent risks. The semiconductor index surged 101% in the first half of the year, but by Wednesday it was 14.1% below its June 22 peak and down nearly 12% for July. If AI data-center demand falters while SK Hynix, Micron, and Samsung ramp up production, the current tight supply could quickly turn into a glut. Options on SK Hynix are set to begin trading two business days after the ADR debut, which could increase volatility. Daniel Newman, CEO of Futurum Group, suggested that Micron's diversification and U.S. base might make it a safer bet in the event of a sharp AI downturn.
Looking ahead, chip equipment and foundry stocks are in the spotlight. ASML Holding (NASDAQ:ASML) is scheduled to report second-quarter earnings on Wednesday, July 15. Taiwan Semiconductor Manufacturing Co (NYSE:TSM) will provide guidance on Thursday at 2 a.m. EDT, with revenue expected between $39.0 billion and $40.2 billion and gross margin in the 65.5%-67.5% range. Investors will watch ASML's order book and TSMC's margins to see if strength in memory demand is spreading to other parts of the AI supply chain.
The key question for investors has evolved from whether AI demand is real to whether the scarcity premium can be maintained as more capital enters the space. SK Hynix has addressed the funding side; now all eyes are on ASML and TSMC to see if supply can keep pace with demand.
