Turbo-charged SK Hynix volatility shows no sign of abating as AI euphoria swings to fatigue

By Jules Rimmer

Saw-toothed trading continues in SK Hynix: up 9% Wednesday, down 11% Thursday

Although it's fallen by a quarter in the last month, Korea's main share index is still up 61% for 2026.

SK Hynix shares continued their rollercoaster ride Thursday with a 12% collapse following on from Wednesday's near 9% jump.

The precipitous decline came despite upbeat earnings and guidance delivered by fellow semiconductor giants ASML (NL:ASML) and Taiwan Semiconductor Manufacturing Company (TSM) in the last 24 hours.

Once again, it appears intense speculative activity, turbo-charged with leverage, is responsible for the decline amid overall concerns from investors about the sustainability of the AI capex boom.

In the past month, SK Hynix (KR:000660) has lost a third of its market capitalization, despite consistent earnings revisions upwards from the analyst community. The derating is such that SK Hynix now trades on a forward price-to-earnings multiple for 2027 of just 3.9 times, according to estimates submitted to FactSet. The mean target price of analysts covering the stock is just above 3.5 million won - almost double the current price.

The SK Hynix move was not in isolation. Fellow Kospi KR:180721 heavyweight Samsung Electronics (KR:005930) dropped 8% and there were major markdowns in Japan's Kioxia Holdings (JP:285A), following a slide in U.S.-listed Micron (MU) on Wednesday.

On Nasdaq Wednesday SK Hynix American depository receipts (SKHY) traded down 9% and in pre-market trading Thursday are indicating another 6% drop to around $166. This puts the ADRs at a roughly 32% premium to the local shares.

The volatility of the Korean market, and of SK Hynix in particular, is startling. Kospi index volatility stands at 85, implying a daily move in the index of more than 5% while the implied volatility on SK Hynix is 113%, suggesting daily swings of 7%. As a consequence, hedging the stock through options is prohibitively expensive which may deter some institutional investors.

The Korean authorities are sufficiently concerned about the volatility to temporarily halt new single-stock leveraged exchange-traded funds, which, in practice, are almost exclusively focused on SK Hynix and Samsung. Separately, the South Korean finance minister is set to meet with officials from the Financial Services Commission to discuss capital markets with a view to imposing more stability on financial markets.

Just as in the U.S. when the volatility index VIX or 'fear gauge' rises, stock markets tend to fall, so in Korea will less volatility imply better equity trading conditions.

Separately, the Bank of Korea hiked interest rates 25 basis points, taking the policy rate to 2.75%, largely as the market expected. The central bank also alerted economists to the overwhelming likelihood that Korea will materially exceed its previous growth forecast of 2.6% for 2026.

With the chip boom generating a record current account surplus, interest-rate differentials now turning more favorable for Korea and the currency looking cheap according to many forex strategists, the Korean won (USDKRW) has improved in the last few trading sessions.

In the last few years weakness in the won has undermined some of the stock market's strong returns. This may encourage international investors who have mostly been exiting Korean equities this year, dumping $31 billion of stock in June alone.

The next significant catalyst for SK Hynix shareholders will be second-quarter results slated for July 29 with analysts generally expecting robust growth numbers.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-16-26 0557ET