SK Hynix, one of the most prominent chip makers in South Korea, announced on Wednesday that it will buy back shares worth a record 40 trillion won ($28.9 billion), in an effort to enhance shareholder returns and support the stock after sharp declines in the sector.
The company is a major producer of high-bandwidth memory (HBM) chips used to power artificial intelligence applications, and its shares have benefited strongly from the surge in demand for these chips since the beginning of the year.
But the stock fell by about 50 percent during July after reaching its peak in June, with growing concerns that huge investments in artificial intelligence may not achieve the expected returns as quickly as investors hope.
Although the stock recovered during August, it fell 9.8 percent on Wednesday, in light of the return of concern about technology stocks, in conjunction with the rise in inflation, government bond yields, and oil prices.
After the market closed, the company said that its board of directors approved a plan to repurchase and cancel treasury shares worth 40 trillion won, explaining that the move aims to “efficiently reallocate capital and enhance shareholder value,” considering that its stock is “valued below its intrinsic value.”
The move comes at a time when the record profits of SK Hynix and its local competitor, Samsung Electronics, have contributed to enhancing optimism about the prospects of the South Korean economy, as the advanced memory chips produced by the two companies are an essential component of the artificial intelligence infrastructure.
The strong performance of the two companies helped push the KOSPI index to a record level of more than 9,000 points in mid-June, before it retreated with the wave of decline that affected technology stocks.
The buyback comes after SK Group Chairman Chi Tae-won bought shares in the company worth about 4.8 billion won in late July, in a move seen as a sign of his confidence in the company's prospects.
SK Hynix said that it will continue to study additional operations to buy back and cancel shares, taking into account cash flows, market conditions and distributable profits.
Last month, the company announced that its net profits rose by more than 1,200 percent during the second quarter, driven by strong demand for advanced artificial intelligence chips.
It also revealed a five-year agreement to supply memory chips worth $750 billion to global technology giants, including Nvidia.
Vietnam maintained its top spot on the list of fastest-growing economies in Southeast Asia during the second quarter, while Thailand ranked last, with the technology and energy sectors resulting in mixed growth across the region.
Bloomberg reported that Malaysia and Singapore ranked second and third for the fastest growing economies. This is due to a recovery in demand for semiconductors and other components used in technology supply chains globally.
In addition to Thailand, the Philippines has also faced rising energy costs due to the conflict in the Middle East. The sharp decline in infrastructure spending also negatively affected growth in the Philippines.
This disparity reflects Southeast Asia's reputation as an increasingly important alternative to China for manufactured exports, and it also shows the uneven gains from this transition, as economies with important companies in the supply chains of AI-related technologies have been more resilient, while economies more vulnerable to the fallout from high-cost imported energy have lost momentum.
