This week's New York markets appear likely to be heavily swayed by Samsung Electronics' (005930.KS) second-quarter earnings and SK hynix's (000660.KS) listing of American Depositary Receipts (ADRs) in the United States. With New York markets having recently undergone a sharp correction amid concerns over an oversupply of artificial intelligence (AI) semiconductors following news of Meta's entry into the cloud business, movements by Samsung Electronics and SK hynix could serve as another signal of a reversal for the market. Moreover, single-stock leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK hynix, launched starting May 27, have made volatility in the two stocks and the KOSPI index greater than ever. This means the earnings of Samsung Electronics and SK hynix, along with news of their Nasdaq listings, could ripple through investor sentiment toward global AI-related stocks. Also worth watching this week are the minutes of the Federal Open Market Committee (FOMC) regular meeting held on the 16th and 17th of last month, the first chaired by the Federal Reserve chairman since taking office. It is highly significant what views were exchanged as FOMC members abruptly shifted their interest-rate outlook for the year from "one cut" to "one hike."
Wall Street Keenly Watching Samsung's Preliminary Q2 Earnings on the 7th... Meta-Driven 'AI Infrastructure Oversupply Concerns' a Turning Point
Wall Street is bracing itself ahead of Samsung Electronics' announcement of preliminary second-quarter earnings due on the 7th. Semiconductor stocks have plunged for two consecutive days since news broke Monday that Meta, the parent company of Facebook, had begun considering a plan to sell surplus resources from the computing infrastructure it built for developing artificial super intelligence (ASI) to outside parties. The Philadelphia Semiconductor Index fell 6.27% on the 1st and 5.45% on the 2nd, and in the aftermath the tech-heavy Nasdaq Composite Index also dropped 0.66% on the 1st and 0.80% on the 2nd. The market immediately interpreted the news that one of the four major hyperscalers (large-scale AI data center operators) had surplus AI infrastructure as a process in which the peak of the semiconductor industry cycle was passing.
According to financial information provider FnGuide, Korean securities firms estimate Samsung Electronics' second-quarter revenue at 171.3723 trillion won and operating profit at 84.9787 trillion won. If the results materialize as such, both revenue and operating profit would be all-time highs.
Chinese media outlet Yicai reported on the 4th that Samsung Electronics was making moves to raise DRAM prices by around 20% in the third quarter. The report said an official at a domestic company had received verbal notification from Samsung Electronics about the DRAM price increase. In this regard, market research firm TrendForce, in its recent memory pricing report, forecast that while the DRAM supply would remain in shortage through the third quarter, the extent of price increases would narrow to around 13% to 18% due to factors such as declining demand for consumer electronics. TrendForce also predicted that third-quarter NAND flash contract prices would rise only 10% to 15% from the second quarter.
There is favorable news not only in memory semiconductors but also in the foundry (contract chip manufacturing) sector. According to U.S. information technology (IT) outlet The Information on the 2nd, Samsung Electronics is in discussions with Anthropic, the developer of the AI model "Claude," over AI chip production. The report said Anthropic had begun early-stage work to develop its own AI chip, and that Samsung Electronics had become a potential manufacturing partner. In detail, Anthropic is considering utilizing the 2-nanometer (nm; one billionth of a meter) manufacturing process and advanced packaging (back-end) facilities of Samsung Electronics' foundry division. The 2-nanometer process is currently the most advanced chip manufacturing process level in the industry. If Samsung Electronics ultimately wins the order for Anthropic's in-house AI chip, it would secure a major new customer following Tesla, Nvidia, and Apple.
SK hynix's Nasdaq ADR Listing on the 10th to Gauge Wall Street's Memory Demand... Possible $29 Billion Raise
SK hynix's Nasdaq listing of American Depositary Receipts (ADRs), scheduled for the 10th, is also expected to be a major variable for New York markets. This is because Wall Street's investment demand for a core memory semiconductor company can be gauged from the bookbuilding process itself. ADRs are securities issued to allow companies listed on foreign stock markets to trade their shares on U.S. markets.
SK hynix earlier disclosed on the 24th of last month that it planned to issue new shares worth up to 45.45 trillion won to list ADRs on the Nasdaq market. This amounts to about 2.5% of total shares. The funds raised through the ADR listing are to be used for facility investment, including the first plant at the Yongin semiconductor cluster in Gyeonggi Province.
The amount SK hynix is expected to raise through the ADR listing reaches $29 billion (about 45 trillion won) in dollar terms. This is larger than the $25 billion recorded by China's Alibaba during its 2014 U.S. market listing. It also rivals the $29.4 billion raised by Saudi Arabia's state-owned oil company Aramco in its 2019 initial public offering (IPO). Aramco's case was the largest IPO fundraising record until SpaceX, led by CEO Elon Musk, raised a total of $85.7 billion (about 130 trillion won) on the 10th of last month.
According to the U.S. Securities and Exchange Commission (SEC), SK hynix completed the Nasdaq listing process again on the 30th of last month by amending its existing registration statement. SK hynix amended the document by adding only litigation risk to the "Risk Factors" section. The content concerned an antitrust class-action lawsuit filed by indirect purchasers of commodity DRAM in the U.S. District Court for the Northern District of California on the 25th of the same month. The lawsuit was brought by 14 U.S. consumers and three small and medium-sized PC manufacturers against Samsung Electronics, SK hynix, and Micron. The plaintiffs argued that rising memory semiconductor prices had led to price increases for finished IT products such as MacBooks and iPads, causing consumers to suffer direct financial harm.
Apart from the litigation content, there were no changes from the first registration statement of June 24. Key offering terms such as the offering price, ADR issuance volume, and the ADR-to-common-share conversion ratio remained blank. According to the registration statement, SK hynix plans to finalize the offering price in consultation with the underwriters, reflecting the latest trading price and market conditions.
Bloomberg further reported on the 4th that SK hynix was considering paying the ADR listing underwriters a fee of about 0.5% of the funds raised. While the fee rate is not high by Wall Street standards, the total fees were expected to approach 200 billion won given the sheer size of the fundraising. In SpaceX's case, the IPO fee rate was 0.67%. The underwriters for the SK hynix ADR are four major global investment banks (IBs): Bank of America (BofA), Citigroup, Goldman Sachs, and JPMorgan.
U.S. Markets Often Trail Korean Companies' Moves... Also Watching Warsh's First FOMC Minutes on the 8th
In the Korean market, SK hynix's current share price is generally valued lower than that of Micron, which ranks third in both high-bandwidth memory (HBM) and commodity DRAM segments in the United States. Considering that SK hynix's HBM market share in the first quarter of this year was 58%, far higher than Micron's 21%, this can be seen as a result of the "Korea Discount" (the phenomenon of undervaluation in the Korean stock market). According to FnGuide, Korean securities firms on average expect SK hynix's earnings, scheduled for release on the 23rd of this month, at revenue of 83.3516 trillion won and operating profit of 63.7334 trillion won. Both would be all-time highs, far surpassing this year's first-quarter records.
Wall Street sees SK hynix's Nasdaq listing having the effect of diverting funds that had flowed to other memory semiconductor makers such as Micron and SanDisk. In that competitors already exist in the market, this differs from Taiwan's foundry (contract chip manufacturing) company TSMC, which listed ADRs on the New York Stock Exchange (NYSE) on October 8, 1997.
