This Friday, July 10, heavyweight players in the storage chip industry are about to write a new chapter in the U.S. stock market.

SK Hynix submitted a revised F-1 registration document to the U.S. Securities and Exchange Commission (SEC) on June 30, planning to achieve a dual listing on NASDAQ under the trading code SKHY. This issuance is expected to raise approximately $29.4 billion, all in the form of new American Depository Receipts (ADR). Once this figure is finalized, it will surpass Alibaba's record of $21.8 billion set in New York in 2014, becoming the largest ADR initial public offering in history.

How can a South Korean chip giant secure an order book of nearly $30 billion in the U.S. stock market? After such a massive influx of funds, will Hynix's stock price rise even further, or will it become a turning point for a short-term peak?

The answer may lie in the following favorable logic and potential risks.

1. Reasons for Short-Term Optimism

1. Valuation Discount Expected to Adjust - The Core Bullish Logic

The first and most direct opportunity facing Hynix is valuation adjustment.

Based on earnings expectations for the next 12 months, Hynix's current price-to-earnings ratio is only about 6.2 times. In contrast, its main competitor Micron Technology has a valuation of about 7 times under the same criteria—this is after a 14% plunge in Micron's stock last week. Just to note, on June 22, Micron's valuation was still above 11 times.

HSBC's research team identified the long-term reasons for this valuation gap: Over the past 13 years, Micron has enjoyed an average 35% valuation premium over Hynix. The underlying reasons are quite pragmatic—Micron has better access to domestic American investors, more shareholder-friendly governance policies, and a higher price elasticity (beta) due to a smaller earnings base.

Thus, HSBC proposed a crucial assumption: as Hynix lands on NASDAQ, its ADR is likely to achieve a 20% valuation premium. This means that simply "gaining more attention and inflow of funds from American investors" could drive Hynix's valuation closer to Micron's.

2. Passive Funds "Fresh Capital" - Automatic Buying from ETFs

The listing of ADRs brings not only attention from actively managed funds but more importantly, it opens the channel for passive funds.

Once SKHY is listed on NASDAQ, it will qualify for inclusion in the constituent stocks of major U.S. indices. The most direct path is to be included in the NASDAQ 100 Index—this index is tracked by the Invesco QQQ Trust (QQQ), which manages about $482 billion in assets. Being included in the NASDAQ 100 means that hundreds of billions of dollars of passive management funds will be passively allocated to SKHY, creating steady incremental buying.

For an Asian chip giant that previously traded mainly on the Korean Exchange, the "fresh capital" effect from passive funds should not be underestimated. It can not only significantly enhance the daily liquidity of the stock but also reduce the stock price volatility in the long term—because the inflow of ETF funds tends to be regular, making sharp inflows and outflows less likely.

3. Active Arbitrage Funds - The "Balancer" of Price Differences

There is almost certain to be a price difference between the ADR and the parent stock on the Korean KOSPI market. This difference is a natural "arbitrage machine" for hedge funds.

Historical scripts have been written: Alibaba and TSMC, when they were listed on U.S. stocks, both experienced significant price differences between ADRs and parent stocks, attracting considerable arbitrage funds. The logic behind the arbitrageurs' operations is straightforward: buy in the market where the price is lower, sell in the market where the price is higher, and lock in risk-free profits through cross-market hedging.

While this arbitrage activity is microscopically about "earning the price difference," it macroscopically serves to equalize valuations across the two markets. In the short term, active arbitrage funds usually provide support for the KOSPI parent stock—because arbitrageurs need to buy the parent stock in the Korean market to hedge their short positions in the ADR.

4. Fundamentals Provide a Solid Valuation Anchor

All narratives of valuation adjustment ultimately need support from fundamentals. And Hynix's fundamentals can be considered one of the strongest in the global chip industry today.

According to company guidance and market expectations, Hynix is expected to achieve a net profit of 221 trillion won (about $144 billion) and revenue of 355 trillion won (about $231 billion) for the fiscal year 2026, representing a year-on-year growth of 415% and 265% respectively. In comparison, Micron's current fiscal year (ending August 31) is expected to see net profit surge 876% to approximately $83 billion and revenue leap 247% to $130 billion.

What is more noteworthy is Hynix's structural advantages in the global storage chip landscape:

• DRAM: Second in global market share (29.1%)

• HBM (High Bandwidth Memory): First in global market share (56.4%)

• NAND: Second in global market share (18.5%)

HBM is currently one of the most sought-after components in the AI chip supply chain, and Hynix's absolute leading position in this sub-segment provides it with pricing power and profit margins far exceeding traditional DRAM business.

2. Risks That Cannot Be Ignored

1. Supply Shock - Almost $30 Billion in New Equity

The $29.4 billion ADR scale, while historic, brings a direct side effect: dilution.

According to regulatory filings, this ADR issuance corresponds to an increase of 17.79 million shares (not a reduction by existing shareholders), with a total value of about 45.45 trillion won (approximately $29.65 billion). This means that SK Hynix's total equity will expand as a result.

The impact of the new equity on existing shareholders is the dilution of earnings per share (EPS). From a trading perspective, such a large supply of new shares entering the market in the short term may also create direct supply pressure on the stock price.

More subtly, there are the implications for arbitrage. Since ADR pricing often refers to valuation levels in the U.S. stock market (which are usually higher than those of the KOSPI parent stock), arbitrageurs may choose to buy the relatively cheaper KOSPI parent stock in the Korean market while shorting the relatively expensive ADR in the U.S. market. This operation, while equalizing the price difference between the two markets, may also create downward pressure on the KOSPI parent stock in the short term.

2. Significant Previous Gains - Stock Price May Be Overextended

When discussing the catalytic effect of the ADR listing, one premise cannot be overlooked: Hynix's Korean stocks have already risen significantly over the past year.

Recently, Hynix's stocks listed in Korea have cumulatively risen about 710% over the past 12 months—even after experiencing a correction of about 20% from its peak in June. Since the beginning of this year, the stock price has skyrocketed over 220%, with a market capitalization once exceeding $1.1 trillion.

This level of increase suggests that the current Hynix stock price already contains a large amount of positive expectations regarding the HBM super cycle and future growth. While the incremental funds from the ADR listing are indeed a positive factor, whether they can push the stock price to continue breaking through the already multiple times doubled base is a question that needs to be raised.

"Good companies" and "good prices" are always separated by a layer of valuation filter.

3. The Shadow of Cyclicality in the Storage Industry - Samsung's Financial Report Has Already Sounded the Alarm

One of the most essential characteristics of the chip industry is its strong cyclicality. Recent financial results from peers like Samsung Electronics have already sounded an alarm for the entire industry.

On July 7, Samsung announced one of its best financial reports ever—profits hit record highs. However, on the same day the report was released, Samsung's stock price fell nearly 7%. Hynix's stock price also dropped that day.

Why did the best financial report result in the worst stock price reaction?

Because the market clearly saw that Samsung's profits largely came from the super cycle bonuses brought by the price increases of DRAM and NAND chips. This is not a unique competitive advantage (alpha) of Samsung but a cyclical bonus (beta) that the entire industry is enjoying. When the whole industry is making "cyclical money," the market is not pricing who has stronger execution but rather how long this cycle can last.

The fact that both Hynix and Samsung are falling indicates that investors are re-evaluating the cycle top of the entire storage industry. While ADR listing can indeed bring in incremental funds, if the industry itself is approaching a cyclical inflection point, the driving force of these funds may be offset by larger cyclical headwinds.

3. Opportunities and Challenges Coexist

SK Hynix's listing on NASDAQ is a milestone event. The scale of $29.4 billion raised itself indicates global capital's recognition of the AI storage narrative, and the valuation repairs, passive fund inflows, and arbitrage support brought by the ADR listing indeed constitute catalytic factors worthy of attention in the short term.

However, investors also need to be clear-headed: this ADR issuance is new equity rather than the reduction of existing shares, the previous significant gains have already overdrawn part of the expectations, and the strong cyclicality of the storage chip industry is sending warning signals through Samsung's financial reports.

Based on historical experience and current favorable logic, Hynix's stock price may still enjoy some uplift in the short term after the ADR listing, especially supported by incremental funds from American investors. However, for rational long-term investors, potential risk factors—dilution effects, previous significant gains, and the possibility of reaching a cycle top—also need to occupy important positions in decision-making.

Final Thoughts

The listing of SK Hynix's ADR provides U.S. investors with a direct window to participate in the world's leading HBM enterprises. If you are interested in the investment logic of the storage chip industry and AI infrastructure, this will be an event worth paying attention to.

In response to the market fluctuations in the initial phase of this new stock listing, BIT has introduced targeted phased trading guarantees (such as bearing 50% of the loss risk within a limit, granting fractional shares of Hynix for meeting position thresholds, etc.), to assist investors in initially exploring more reasonable smoothing of the cost curve. For investors focusing on the AI semiconductor cycle and looking to optimize their asset allocation tools, keeping an eye on quality channels and official updates (such as BIT's official X: @BITstocks_CN) will help capture the liquidity benefits of top-tier global chip assets in a timely manner.

Disclaimer

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