Micron Technology has faced stock market difficulties in recent weeks, and the upcoming U.S. listing of its South Korean competitor SK Hynix is set to exacerbate its challenges.
As the world's third-largest memory chip manufacturer, Micron began the year with a strong performance, with its stock surging nearly 50% in January, ranking second in gains within the S&P 500 index. However, recent pressures from concerns in the memory sector and broader market uncertainties triggered by the Iran conflict have weighed on its share price. Despite two significant trading days of gains last week and a continued rebound on Monday, its stock remains nearly 20% below the peak seen three weeks ago, with March marking its worst monthly performance in nearly four years.
Now, SK Hynix, a key supplier to Nvidia, has submitted an application to issue American Depositary Receipts (ADRs) in the United States this year, with the financing round potentially reaching up to $10 billion. If successful, this would become one of the largest IPOs by a foreign company in New York. It would also end Micron's status as the sole supplier of dynamic random-access memory (DRAM) chips in the U.S. stock market, providing American investors with an alternative investment opportunity in artificial intelligence infrastructure.
Rob Lee, Managing Partner at New York hedge fund Amont Partners, stated, "Short-term capital is likely to shift from Micron to SK Hynix, as SK Hynix currently has a lower valuation."
On Monday, amid signs that the Iran conflict could see a diplomatic ceasefire, the broader market rebounded, with Micron's stock rising by as much as 5.1%.
Although Micron holds a significant presence in the U.S. market, it still trails behind SK Hynix and Samsung Electronics in the global DRAM market. According to Counterpoint Research, SK Hynix captured 57% of global revenue share in high-bandwidth memory (HBM), a premium segment of DRAM, in the fourth quarter of last year—more than double Micron's share.
Both companies currently trade at relatively low valuations, with forward price-to-earnings ratios around 4 times, significantly below the S&P 500's valuation of approximately 20 times. However, Micron's stock still carries a slight premium compared to SK Hynix. Ted Mann, Global Equity Portfolio Manager at New York-based Ariel Investments, suggested that the price gap is likely due to Micron being "the only DRAM play in the world's largest stock market."
Kenny Kim, CEO of Seoul-based hedge fund Meridian One Asset Management, believes that the listing of SK Hynix ADRs for U.S. retail investors could narrow the valuation gap between the two companies. It would also provide hedge funds with new opportunities for long-short pair trades.
"Both are pure-play memory chip companies, but SK Hynix holds a leading position in the HBM segment," Kim remarked, referring to high-bandwidth memory chips.
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