The 26% surge in SK Hynix Inc.’s stock this year, fueled by the AI-driven rally, is encountering headwinds as local investors retreat from the memory chipmaker, driven by political uncertainties and high valuations. The Korean retail investor exodus from SK Hynix is on track to be the largest monthly withdrawal in over a decade, just as the company is poised to report its best January since 2009. Market experts suggest that with the stock reaching impressive highs, many investors are increasingly inclined to take profits.
Nvidia Corp., a leader in AI technology, has also experienced a slowdown this month, as fears of increased competition and decelerating growth weigh on sentiment. Meanwhile, Korean investors are shifting their capital away from tech stocks, favoring sectors that stand to benefit from U.S. President Donald Trump’s policies, as well as smaller local firms expected to undergo corporate reforms.
“The market is shifting its focus to sectors that could see rapid change under Trump’s administration, particularly energy,” said An Hyungjin, CEO of Seoul-based Billionfold Asset Management. “While SK Hynix could see some continued growth, I’m concerned about whether it can sustain momentum if Nvidia’s rally falters.”
SK Hynix is poised to report a record quarterly net income of 5.9 trillion won (roughly $4 billion) on Thursday, bolstered by its role as a key supplier of high-bandwidth memory (HBM) chips, which complement Nvidia’s AI processors. Over the past two years, SK Hynix’s stock has more than doubled, riding the wave of AI enthusiasm, although this growth pales in comparison to Nvidia’s sevenfold increase. The broader semiconductor sector, particularly memory chips, remains subdued amid concerns over weak demand in the automotive and electronics industries.
Korean investors may be taking profits from SK Hynix after its stellar performance, as memory chip prices are expected to continue their downward trend into the first half of 2025, according to Gary Tan, portfolio manager at Allspring Global Investments. Additionally, foreign investors who have driven much of the stock’s rise could view memory chips as a lagging segment in the AI revolution.
Valuation concerns are mounting as SK Hynix’s price-to-book ratio has climbed to 2.8, far exceeding its three-year average of 1.6. This increase in price has made the stock appear more expensive, and with the broader shift in investor sentiment, many are diverting their attention to other sectors like shipbuilding and nuclear energy, which stand to benefit from U.S. policy changes.
On the domestic front, some investors expect the opposition party’s corporate reform agenda to gain traction following the impeachment of President Yoon Suk Yeol over his failed martial law attempt. Smaller, domestically oriented companies that offer significant room for improvement in shareholder returns are seen as particularly attractive.
Marcello Seongsoo Ahn, a portfolio manager at Quad Investment Management, suggests that while SK Hynix may see further price increases, it is likely to be outpaced by other companies benefiting from domestic reforms. “There are many firms that could outperform due to changes in the commercial code,” he noted. “While SK Hynix could rise, its gains may lag behind those of smaller, reform-driven companies.”
In conclusion, while SK Hynix remains a key player in the AI-driven chip market, increasing political uncertainties, high valuations, and shifting investor preferences are clouding its prospects, suggesting that its rally could be nearing its peak.
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