Memory chip stocks jump 6% as SK Hynix buyback fuels sector rally

SK Hynix ADR jumped more than 6 percent on August 20, leading a rally in US-listed memory and storage chipmakers that defied broader market weakness.

"The repurchase period is scheduled to run for approximately three months starting August 20, with all repurchased shares set to be cancelled upon completion of the acquisition," SK Hynix said in its regulatory filing.

SanDisk rose over 3 percent and Micron Technology gained nearly 2 percent. The buyback — 40 trillion won ($29 billion), representing about 24.07 million shares or 3.3 percent of total issued shares — marks the largest treasury share cancellation by a South Korean listed company.

The move comes as investors pressure chipmakers to return excess profits from the AI boom. SK Hynix, the primary memory chip supplier to Nvidia, committed to allocating more than 50 percent of cumulative free cash flow between 2025 and 2027 to shareholder returns.

The rally draws on several drivers. Tesla CEO Elon Musk publicly endorsed memory stocks on X, calling memory the core bottleneck in the autonomous AI era. The US government has also urged domestic tech firms to avoid purchasing conventional memory chips from Chinese suppliers, strengthening the position of US and allied chipmakers. The advance came as major US indices traded lower, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all in negative territory.

SK Hynix holds a 58 percent share of the global high-bandwidth memory (HBM) market in Q1 2026, according to Counterpoint Research, with Samsung and Micron each at 21 percent. TrendForce projects Q3 2026 DRAM contract prices to rise 13-18 percent quarter-over-quarter and NAND Flash prices to increase 10-15 percent, supported by AI server demand. The Philadelphia Semiconductor Index rose 1.64 percent on August 18, with SanDisk surging 8.88 percent and Western Digital gaining 5.35 percent before the sector pulled back in premarket trading on August 19.

SK Hynix expands shareholder returns to over 50 percent of free cash flow

SK Hynix's board raised its shareholder return target from "within 50 percent" to "over 50 percent" of cumulative free cash flow for 2025-2027, delivered through share repurchases, cancellations, and cash dividends. The company said options to expand payouts, including existing fixed dividends and special dividends, are under consideration.

The announcement followed a 9.75 percent drop in SK Hynix's KOSPI-listed shares to 1,500,000 won on August 19, part of a broader tech selloff that also hit the ADR. The ADR, which debuted on Wall Street on July 10, has lost more than 7 percent since listing but gained nearly 3 percent over the past month. Its all-time high stands at $194.80, with a record low of $124.80.

Peers are following suit. SanDisk added $14 billion to its buyback program, while Micron is nearing the expiration of CHIPS Act restrictions that have limited capital return options.

SK Hynix said its intrinsic value — underpinned by business competitiveness, strong cash generation, and mid-to-long-term growth potential — is not fully reflected in its current stock price. The company's Korean shares are up 130 percent year-to-date, while the ADR trades about 8 percent below its July listing price.

The sector's coordinated advance shows investors rewarding capital return programs even as AI infrastructure spending concerns persist. With DRAM and NAND contract prices expected to keep climbing through Q3, memory chipmakers appear positioned to sustain both earnings growth and shareholder payouts.

This article is for informational purposes only and does not constitute investment advice.