SK hynix is trying to buy back some love from investors. The memory chip maker saw its stock jump more than 5% in Wednesday's premarket trading, a day after a brutal 9.2% selloff. The rebound comes as the company rolls out a massive shareholder return plan, hoping to counter growing worries about AI spending and higher interest rates.
Here's the headline number: SK hynix is committing 40 trillion won, or about $29 billion, to a stock buyback. That's a big number, even for a company that's been riding the AI wave. The plan involves repurchasing up to 24 million treasury shares between Aug. 20 and Nov. 19, and then canceling them. Canceling shares is a nice touch, because it permanently reduces the share count, making each remaining share worth a little more.
But the buyback is just part of the story. SK hynix also raised its shareholder return target to more than 50% of free cash flow. Previously, it had said it would return up to 50%. That might sound like a small tweak, but it's a meaningful shift in how the company thinks about returning cash to shareholders.
The timing is interesting. SK hynix just completed a $26.5 billion U.S. listing about a month ago. The listing was supposed to help close the valuation gap between its Korean-listed shares and its global peers. But since then, investors have gotten cold feet about the durability of AI infrastructure spending. The buyback looks like a direct response to that skepticism.
Josh Gilbert, an analyst at eToro, told Bloomberg that the size of the buyback signals SK hynix is listening to investors. By deploying its growing cash reserves, the company is trying to show that it's serious about shareholder returns. CLSA Securities Korea research head Sanjeev Rana added that while the U.S. listing hasn't yet closed the valuation gap, the buyback could help ease criticism from retail investors in Korea, who have been vocal about wanting more returns.
SK hynix is a key supplier of high-bandwidth memory to NVIDIA, making it a major beneficiary of the AI data-center boom. But that also makes it vulnerable to any signs that AI spending is slowing. Lately, memory stocks have been under pressure from exactly those fears. On top of that, higher bond yields have been weighing on tech valuations across the board.
Gary Tan, a portfolio manager at Allspring Global Investments, told Bloomberg that buybacks could provide a temporary cushion for the stock. But he cautioned that interest rates are the bigger driver for memory stocks. In other words, the buyback is nice, but it's not going to save the day if rates keep climbing.
So what do analysts think about SK hynix right now? The stock carries a Buy consensus rating with an average price forecast of $245.50. Forecasts range from $200 to $320. On Aug. 4, Wolfe Research and RBC Capital both initiated coverage with Outperform ratings and $200 price targets. Cantor Fitzgerald also started coverage that day, with an Overweight rating and a more bullish $300 price forecast.
On the MarketDash Edge scorecard, SK hynix scores a 98.26 on growth and a 59.49 on value. That's a strong growth profile with a more neutral valuation, which makes sense for a company that's growing fast but isn't exactly cheap.
For ETF investors, the NestYield Dynamic Income ETF and NestYield Visionary ETF each have a 4.77% weighting in SKHY, so they're a way to get exposure to the stock without picking individual shares.
As for the price action, SK hynix shares were up 5.34% to $163.93 in Wednesday's premarket trading. That's a nice bounce, but the real question is whether the buyback can hold off the broader concerns about AI spending and rates. The company is betting that a $29 billion check will do the trick. We'll see if investors agree.
