(Bloomberg) -- A $470 billion rout in just a little over a month has flipped SK Hynix Inc. from one of the world's hottest AI trades to one of the biggest portfolio question marks.
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Shares of the South Korean memory chipmaker plunged 38% from their all-time high in June on concerns over overcrowding and a surge in leverage-induced volatility. It's erased more market value than any other stock in that span globally except SpaceX.
While SK Hynix is expected to report another quarter of record earnings on Wednesday as the AI boom drives chip prices higher, investors are turning skittish. The primary fear is that the rising memory costs will force customers to reduce usage and turn to cheaper alternatives. "The debate now is whether memory is taking too much of the pie," said Andy Wong, head of multi‑asset at Pictet Asset Management HK Ltd., whose fund has reduced its position in SK Hynix in recent weeks. The market wants to see if "anything can shift the perception that SK Hynix is squeezing too much margin out of the supply chain."
The company's shares are being more closely watched than ever following its listing of American depositary receipts earlier this month. The proliferation of leveraged exchange-traded funds tied to the stock has also grabbed global attention due to the unprecedented volatility they have unleashed.
The stock is still on track for another year of triple-digit gains, buoyed by the firm's early lead in high-bandwidth memory for AI. This month's pullback tracks broader caution over the tech hardware sector as doubts multiply over the durability of hyperscaler outlays.
Crucial results are due this week from top tech firms including Meta Platforms Inc., whose plan to sell excess AI computing power stoked concerns over demand earlier this month. Apple Inc. has already flagged cost pressures and is reported to be lobbying for approval to buy memory components from Chinese competitors including CXMT Corp.
Investors also await full results for the June quarter from larger rival Samsung Electronics Co. The world's biggest maker of conventional memory chips is catching up to SK Hynix in HBM, said Kim Minji, a portfolio manager at Must Asset Management in Seoul.