SK Hynix shares went up on Wednesday after the memory chipmaker said it would spend tens of billions of dollars to buy back its own stock. This move may help reassure investors who are worried about how long the AI spending boom will last.
The South Korean company’s American depositary receipts rose 5.6% before the U.S. market opened, while the main stock indexes stayed about the same.
SK Hynix said its board has approved a plan to buy back and cancel 40 trillion won, or about $29 billion, worth of shares over three months starting August 20. The company also raised its goal for returning money to shareholders, now aiming to give back more than 50% of free cash flow, up from its previous target in that range. SK Hynix said it made this decision because it believes the current stock price does not show the company’s true value.
The buyback follows SK Hynix’s U.S. share listing about a month ago, which raised $26.5 billion. However, the American depositary receipts have dropped sharply since then, falling through Tuesday’s close.
The recent drop in the stock has happened as investors worry about how long the current AI-driven demand for memory chips will last. The buyback announcement may help ease those concerns by showing that management believes the shares are undervalued. Canceling the repurchased shares could also help steady a stock that has been very volatile lately.
