South Korean chip giant SK Hynix Inc. experienced its second 30% drop in a week, albeit momentarily, on Thursday, August 6, according to reports from CNBC TV18. The stock plunged during a 50-minute pre-open session on Nextrade, a new South Korean bourse launched last year to handle transactions before and after regular trading hours. After the flash crash, SK Hynix ended the session lower by 2%, while regular trading on the KOSPI saw the stock decline 10%. The latest crash follows a similar incident last Tuesday when SK Hynix plunged to its lower limit before subsequently paring losses, as reported by CNBC TV18.
According to Bloomberg reports, 11 shares of SK Hynix changed hands at 11,68,000 won each at 8 AM local time during the flash crash. The incident highlights concerns with Nextrade's trading mechanism, which uses only a single price source unlike most stock exchanges that employ multiple price sources. Most global alternative exchanges operate similarly to Nextrade's single-source model.
The latest crash follows SK Hynix's announcement on Wednesday that it expects its capital expenditures to surge 50% this year to at least $31 billion, as reported by The Kobeissi Letter. The company is attempting to meet the strong demand for its memory chips, which are playing a key role in the AI boom. This massive capex increase reflects the semiconductor industry's response to unprecedented AI-driven demand for memory solutions.
The SK Hynix crash is part of a broader semiconductor sector rout that has been brutal this summer. The SOX has declined 18.9% so far in July and is on track for its largest monthly loss since 2008, according to The Kobeissi Letter. Sandisk shares plunged 17% on Tuesday and are now down 30% in five days, having crashed about 55% from its record high in late June. The stock looks to be on a collision course to test its 200-day moving average around $832, which would represent a roughly 24% drop from current trading levels.
The KOSPI index declined 5% on Thursday, following wild swings throughout the week, according to CNBC TV18. The index had experienced an 18% upmove last Friday before the current volatility. Nextrade has reportedly increased its market share since launching last year by offering longer trading hours and cheaper fees, though it has gained attention for negative reasons including these flash crashes. The declines are happening at a fierce pace, spreading across the sector, with sentiment having been crushed according to market strategists.
