Global memory chip stocks experienced a sharp selloff on Monday, driven by a combination of escalating concerns over artificial intelligence (AI) infrastructure investment and the strong market debut of memory chip manufacturer Cxmt Corporation (688825.SH), the parent company of ChangXin Memory Technologies.
Less than a month after its initial public offering, the American Depositary Receipts of SK hynix (SKHY.US) fell below their offer price. Other memory chip stocks, including Micron Technology (MU.US) and SanDisk (SNDK.US), also declined in tandem.
On Monday, SK hynix's ADR price dropped as much as 10%, reaching a session low of $139.01, which is below the $149 IPO price set on July 9. The stock closed at $143.02, roughly 4% lower than its debut price. The IPO itself raised a substantial $26.5 billion, making it one of the largest global IPOs this year.
Simultaneously, the Philadelphia Semiconductor Index continued its recent downward trend, closing at its lowest level since May 19, indicating a sustained market retreat from the previously high-flying AI semiconductor sector.
Analysts attribute this adjustment primarily to growing anxiety about the sustainability of AI infrastructure investments. Reports surfaced that Nvidia (NVDA.US) is in discussions for AI infrastructure projects totaling over $750 billion and is planning to provide financing support for a data center project linked to OpenAI. This has fueled market worries about continuously expanding capital expenditure across the AI supply chain. Consequently, the price of credit default swaps for Nvidia recorded its largest single-day increase on Monday, signaling a significant cooling of investor risk appetite.
Notably, amidst the stock price decline, SK hynix announced a partnership with Nvidia to build an AI data center in South Korea with a total capacity exceeding 2 gigawatts (GW), which is enough to power approximately 1.5 million households. The first "AI Factory" under this project, built by SK Telecom, is expected to begin operations next year. However, this positive news failed to lift the stock price, as the market's focus remained fixed on the soaring capital demands and uncertain future returns of the AI industry.
On the other front, the listing of Cxmt Corporation on the Shanghai Stock Exchange on Monday further intensified concerns about heightened competition within the industry. Its stock price surged 466% on its first trading day, quickly pushing its market capitalization to approximately $484 billion. The company specializes in DRAM memory chips, putting it in direct competition with SK hynix, Micron, and Samsung Electronics.
Adding to the pressure, another domestic memory chip manufacturer, Yangtze Memory Technologies Co. (YMTC), is also expected to launch its IPO later this year. YMTC focuses on NAND Flash memory products, thereby competing with Micron, SanDisk, and SK hynix. Dogged by the overall market sentiment, Micron closed 2.25% lower on Monday, while SanDisk suffered a much steeper decline of 11.02%.