UBS favors large internet and platform companies with strong AI monetization potential, leading cloud services, and stable core businesses, as well as certain semiconductor and AI infrastructure firms benefiting from import substitution and AI capital expenditure.
South Korean memory chip giant SK hynix is expected to announce the final pricing for its American Depositary Receipt (ADR) offering after the close of the Korean market on Thursday (9th), with the ADRs scheduled to begin official trading on the Nasdaq Global Select Market on Friday, having already received 7 times oversubscription.
Beyond some large-cap South Korean stocks, foreign institutions widely view Asia-Pacific technology stocks as a new engine for global tech, and are particularly optimistic about the investment value of Chinese equities in the next phase of artificial intelligence (AI) development.
SK hynix US ADR Receives 7x Oversubscription
SK hynix shares surged 7.1% during Thursday's Asia-Pacific trading session, significantly outperforming the KOSPI index's 2.4% gain. This followed several days of sharp declines for the stock as the frenzy for bets on AI computing infrastructure seemed to cool somewhat against a backdrop of extremely crowded and highly leveraged bullish positions in the South Korean market. The stock's Wednesday closing price was down 30% from its record high in late June, but still approximately triple its price at the start of the year. Over the past 12 months, SK hynix's South Korea-listed shares have risen about 850%, propelling the company's market capitalization above the $1 trillion mark and briefly surpassing long-time market leader Samsung Electronics.
SK hynix is issuing 17.79 million new shares through the ADR offering, representing about 2.5% of its issued share capital. According to a previously filed U.S. SEC registration document, each SK hynix US ADR represents one-tenth of an ordinary share. Based on Wednesday's closing price of 2.076 million won per share (approximately $1,380) on the Seoul exchange, the U.S. listing is expected to raise about $24.5 billion, lower than the initially planned amount of around $29.4 billion. Nonetheless, the offering is poised to rank among the largest equity financings completed in the U.S. by a foreign company and will further broaden the company's access to U.S. institutional investors.
It is reported that this US ADR offering received over seven times oversubscription, with institutional investor orders submitted before Thursday's pricing far exceeding the number of shares available. Multiple U.S. investment institutions placed orders ranging from $200 million to over $1 billion, demonstrating sustained market enthusiasm.
SK hynix plans to use the proceeds to expand production capacity to meet the robust and growing demand for high-bandwidth memory chips from AI servers. In a report on Tuesday, UBS advised investors to buy SK hynix's US ADRs and actively sell the memory chip giant's shares traded on the South Korean stock market, as these newly issued securities may trade at a premium.
"Investors should pay attention to the potential for foreign quota space when SK hynix transitions in the future from the local Korean listing line to the U.S. secondary listing ADR line," wrote the UBS analyst team. "The possibility of inefficient and insufficient investment channels could lead to the U.S. trading price transacting at a significant and sustained premium."
Foreign Institutions View Asia-Pacific Tech as New Engine
SK hynix's U.S. listing comes at a time when foreign institutions are generally optimistic about Asia-Pacific stock markets becoming a key engine for the global technology stock rally.
Stuart Rumble, Chief Investment Strategist for Asia Pacific at Fidelity International, stated that AI will remain one of the most significant structural investment themes reshaping global markets, but the nature of related investment opportunities is changing.
"The first phase of AI development was primarily driven by infrastructure investment, including semiconductors, computing power, and data center construction. Supported by continued spending from hyperscale cloud providers and enterprises, this remains a key driver of earnings growth. The performance of current market leaders is not solely reliant on valuation expansion but is built on a foundation of real earnings growth. Companies benefiting from AI infrastructure construction have consistently delivered strong results and have been an important force driving market gains. However," he added, "investor attention is increasingly shifting towards deployment and application. While most of the value created by AI has flowed to semiconductor companies so far, the current focus is broadening to how enterprises integrate AI into products, services, and business processes. In application areas such as software, e-commerce, digital advertising, and enterprise applications, companies are exploring ways to enhance productivity, automate workflows, and improve efficiency. Although still in the early stages of application, potential use cases are expanding into more and more industries."
Based on this changing trend, he anticipates: "Asia will play a pivotal role in the next phase of AI development. The region occupies a unique position across the entire AI value chain, covering semiconductor manufacturing, tech hardware, industrial automation, and digital services. At the same time, compared to some fairly crowded sectors in the U.S. market, many markets in Asia can still participate in the development opportunities of AI innovation and application at relatively reasonable valuations."
David Chao, Global Market Strategist for Asia Pacific at Invesco, also noted that Asia-Pacific equities should continue to perform well over the next six months. On one hand, he stated that capital expenditure in AI will continue. AI will remain one of the most important investment catalysts for the next few quarters and even years. Judging from the spending plans of hyperscale cloud service providers, they are expected to continue increasing investments in areas like data centers, which in turn require various hardware support, forming a complete AI-related industry chain. In the coming years, these related industries and fields are expected to attract trillions of dollars in investment. AI will remain a core driver for corporate earnings within the region and even for macroeconomic growth in major economies. Another opportunity lies in the clean energy transition, where China maintains a leading position. Furthermore, monetary policy in the Asia-Pacific region is expected to remain accommodative, and fiscal policy will also be more supportive of economic growth, both of which are favorable for the markets.
The Chief Investment Office (CIO) of UBS Global Wealth Management also wrote in its institutional perspective that AI is a key driver of the current bull market, and the Asia-Pacific region, as a cornerstone of the global AI supply chain, has performed exceptionally well. The region's stock markets have surged about 40% over the past year and are up 20% year-to-date, led primarily by semiconductors, chip equipment, and memory-related sectors. Beneath the overall strong performance, individual market performances have diverged significantly. East Asian markets with high weightings in technology stocks have significantly outperformed.
"AI capital expenditure growth continues to exceed expectations, providing strong support for Asia-Pacific earnings performance, with earnings expected to surge 72% this year and 20% next year. Based on recent financing activities by major cloud service providers, previous market forecasts of $820 billion and $990 billion in spending for this year and next may be conservative. Model iteration and the development of agentic AI are also driving a surge in computing power demand, exacerbating the supply-demand imbalance for computing power and memory." Looking ahead to the second half of the year, the bank wrote, "AI remains the primary driver for further market gains, and opportunities in Asian markets warrant attention."
Chinese Equities Even More Favored
As AI development enters a new phase, Chinese equities are viewed even more favorably.
Rumble told reporters that over the past few months, investors' focus has been firmly on South Korea, supported by strong demand for semiconductors, AI infrastructure, and advanced hardware. South Korean tech stocks benefited from renewed optimism regarding memory chips and AI-related demand. However, some more interesting innovation stories are quietly emerging elsewhere, yet to be fully discovered. For example, in China, technological progress is increasingly expanding from traditional AI infrastructure to areas such as robotics, automation, advanced manufacturing, and what is often termed 'Physical AI'—the real-world application of AI.
He stated: "Many investors are still exploring where the next disruptive technology opportunity will emerge, and one area worth close attention is humanoid robots. In the large language model field, a few global tech giants enjoy significant advantages in data and computational scale; in contrast, the robotics field remains a relatively open playing field. China has established strong positions in areas such as hardware, motion control, and manufacturing capabilities, while investment in robotics software, data acquisition, and foundational brain models is also accelerating. During recent field visits, I met with several companies active in the robotics ecosystem, further reinforcing my previous judgment that robotics is becoming an increasingly important area of innovation, and China possesses significant potential to lead in this field."
Beyond robotics technology, he also noted continued success stories of Chinese industrial leaders adapting to new growth opportunities. One core focus is the power and energy ecosystem supporting AI build-out. "While investors often focus on semiconductors and memory chips, the expansion of AI infrastructure also requires massive investment in power supply, energy management, and electrical equipment. From photovoltaics and batteries to inverters and power electronics, more and more companies are entering this supply chain with scaled manufacturing capabilities, engineering expertise, and vertical integration, gaining new growth opportunities. This adaptability is often underestimated by the market. Many industrial companies are no longer confined to their traditional end markets but are leveraging their existing technological capabilities to enter adjacent growth areas linked to AI, automation, and electrification. This flexibility remains a significant competitive advantage for China's industrial sector," he said.
Chao also told reporters: "Beyond the well-known tech giants, there are clear expectation gaps in certain sub-sectors and regional economies within the AI revolution. China is not adopting an AI strategy identical to the U.S. China is more focused on integrating AI with more commercially viable products—for example, combining AI with humanoid robots, combining AI with biotechnology scientific research, and combining AI with quantum computing. These sub-sectors may continue to perform well in China."
"The Hang Seng Index is still dominated by internet platform-related companies. Therefore, I am more optimistic about technology companies in the A-share market, including semiconductor companies, humanoid robot companies, quantum computing companies, and biotech companies, where real growth has already emerged," he stated.
UBS similarly believes that leading Chinese internet platforms are showing clear signs of accelerating AI monetization, and with the launch of new-generation AI agents, cloud service revenue is expected to improve. Currently, the forward price-to-earnings ratio of the MSCI China Index is only 10.8x, undervaluing the rapid adoption of AI by China's digital economy. Based on this, UBS favors large internet and platform companies with strong AI monetization potential, leading cloud services, and stable core businesses, as well as certain semiconductor and AI infrastructure firms benefiting from import substitution and AI capital expenditure.
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