Why SK Hynix Stock Just Crashed
Key Points
SK Hynix's U.S.-listed shares crashed one day after a successful debut.
The leading memory chip supplier tripled Q1 revenue year over year.
Investors should expect volatility to continue, but the AI-related demand is real.
South Korean semiconductor giant SK Hynix (NASDAQ: SKHY) began trading in the U.S. market last Friday, and it had a successful debut. But that positive momentum was short-lived, and shares tanked today.
The stock plunged as much as 10%, and remained down by 6.3% as of 1:33 p.m. ET. Now investors want to know if it's time to buy or avoid the leading global memory-chip manufacturer.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Image source: Getty Images.
Why shares tumbled
SK Hynix shares had a strong debut in U.S. markets on Friday, with the American depositary receipts (ADRs) jumping 13%. But uncertainty surrounding artificial intelligence (AI) spending and potentially dilution from a new entrant into the AI stock sector led investors to sell global chip stocks today.
SK Hynix isn't an undiscovered name. Its South Korean shares rocketed 500% over the last year. With fresh coverage and a new listing, some long-term investors are taking profits. Investors now need to decide if the gains were already booked before shares were listed in the U.S.
The memory-chip boom hasn't been waiting for SK Hynix to trade domestically. Stocks like Micron Technology have rocketed even faster than SK Hynix in the last 12 months, gaining about 650%. The AI infrastructure build-out isn't in its final innings, though. SK Hynix raised $26.5 billion in its U.S. debut, and long-term investors shouldn't fear volatility in high-growth tech stocks. Revenue tripled year over year in the first quarter. Adding the ADRs to the tech portion of one's portfolio on today's dip is probably not a bad idea.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.