South Korean memory chipmaker SK Hynix Inc. has announced plans to repurchase 40 trillion won ($29 billion) worth of its own shares to address investor concerns about AI spending sustainability. According to reports from CNBC TV18, the company will buy back and cancel as many as 24 million treasury shares between August 20 and November 19, as detailed in a regulatory filing Wednesday. Based on the closing stock price of 1,662,000 won on the day before the buyback announcement, the program represents a significant capital return initiative. The announcement comes after SK Hynix's shares had fallen 50% in less than two months, pushing the country's stock market sharply down and wiping off significant portions of investors' wealth. The latest developments show SK Hynix's ADR rose 13% on Thursday, August 20, following the buyback announcement, though it later pared gains to close with less than 0.4% gains.
SK Hynix has raised its shareholder-return pledge to more than 50% of cumulative free cash flow generated between 2025 and 2027, equivalent to about $170 billion according to Bloomberg calculations. The company said its "intrinsic value, underpinned by its business competitiveness, robust cash generation capability, and mid-to-long-term growth potential, is not fully reflected in its current stock price." The company will distribute this capital through share buybacks, share cancellations, and cash dividends, expanding its previous policy framework which limited shareholder returns to within 50% of cumulative cash flow. This represents a strategic move to address investor concerns about the durability of AI spending, particularly as rising bond yields have exacerbated worries over large cash outlays by Big Tech companies. As per eToro analyst Josh Gilbert, "The size of this buyback is a strong signal from SK Hynix and delivers something investors have been calling for, putting its growing cash pile to work and increasing shareholder returns."
Under a preliminary wage agreement being discussed by union delegates, SK Hynix has agreed to pay 60% of this year's employee bonuses in shares and the remaining 40% in cash, according to a person familiar with the matter who spoke to Reuters. The agreement would see employees receive shares equivalent to 40% of the total bonus in 2027, while the remaining 20% in stock will be deferred to 2028 and 2029, with no restrictions on stock sales. The remaining 40% would be paid in cash in 2027. The proposed structure represents a significant shift from last year's arrangement, under which SK Hynix agreed to distribute 10% of its annual operating profit to employees in cash form under a 10-year agreement. According to Reuters calculations, SK Hynix workers are on course to receive average compensation of about 779 million won ($547,000) for 2026, reflecting the sharp increase in the company's profitability as demand for high-bandwidth memory and other AI-related chips accelerates. The agreement also includes a 6.3% increase in base wages and a clause allowing the company to defer up to 3% of wages should SK Hynix record losses. The agreement still requires approval from union members, with an SK Hynix spokesperson confirming that the deal was reached directly between management and labor without external mediation.
The announcement came after SK Hynix's shares had fallen 50% in less than two months, though they pared losses in post-market trading. As reported by CNBC TV18, the buyback plan follows the company's $26.5 billion fundraising through a US listing just one month prior, reflecting the enormous capital flows chasing the global AI boom. The memory chipmaker serves as a key supplier of high-bandwidth memory chips to Nvidia Corp.. However, the premarket gain in US-listed shares followed a 9.2% decline on Tuesday amid a broader Wall Street technology sell-off, with its primary South Korean listing also falling 9.75% in Seoul trading on Wednesday. The company's US listing strategy has proven successful, with its ADRs trading at a premium of about 40% to Korean shares as of the market close. According to Moneycontrol, the ADRs rose as much as 5.3% before paring gains to less than 0.4% at the close of trading Wednesday in New York. The combination of higher employee compensation, expanded shareholder returns and strong AI-driven earnings highlights the growing financial benefits of the semiconductor boom for SK Hynix, while also increasing pressure on the company to manage its cash resources carefully.
The announcement coincided with broader pressure on Korean markets, where South Korea's Kospi closed nearly 6% lower on Wednesday to record its biggest one-day drop in three weeks. According to Reuters, analyst Huh Jae-hwan from Eugene Investment Securities noted that "it seems investors are quickly rushing out of stock market volatility, with bond yields being a trigger." The Kospi has been rebounding from earlier lows but faces continued pressure from chipmaker concentration risks. Analysts pointed out that the concentration of chipmakers Samsung Electronics and SK Hynix, which make up just over half of the benchmark Kospi, has intensified pressure for shareholder returns. Nvidia suppliers SK Hynix and Samsung Electronics have faced growing pressure from investors to return a larger share of excess cash through dividends or share buybacks after record profits fuelled by booming demand for AI memory chips. As per CLSA Securities Korea head Sanjeev Rana, "SK Hynix probably wanted to end the chronic undervaluation of the shares at home, hoping the ADR issuance would pull up the overall valuation of the common stock as well," noting that the company is considering additional shareholder returns this year, which may include a special dividend.
