Prediction: This Artificial Intelligence (AI) Chip Stock Is the Biggest Winner From the $26.5 Billion SK Hynix IPO (Hint: It's Not Nvidia)

SK Hynix (NASDAQ: SKHY) ranks among the world's largest producers of memory semiconductors. The company holds market-leading positions in DRAM, NAND flash, and high-bandwidth memory (HBM). As hyperscalers race to build larger training clusters and inference fleets, a shortage of advanced HBM has become one bottleneck controlling the pace of the entire artificial intelligence infrastructure build-out.

Earlier this month, the South Korea-based company completed a secondary listing of American depositary shares on the Nasdaq. The company raised roughly $26.5 billion through the offering, providing it with fresh capital at a time of intense investment needs to meet memory demand.

What will SK Hynix use its IPO proceeds for?

According to the company's Form F-1 registration statement, SK Hynix made clear the newly raised funds would be used for capital expenditures rather than general corporate purposes. The proceeds will be allocated across three areas: construction of a fabrication plant in Yongin, South Korea, development of an advanced packaging and testing facility in Cheongju, South Korea, and the purchase of manufacturing equipment.

Regarding equipment, SK Hynix noted that it will be buying extreme ultraviolet (EUV) lithography systems. These tools will be deployed across its expanding Korean fabs to support higher-volume production of advanced DRAM and HBM products needed for AI workloads. By funneling the entire offering into capacity expansion, SK Hynix is signaling its determination to meet the multiyear surge in memory demand.

What are EUV machines and why do they matter for AI?

To manufacture both AI chips and the memory that supports them, EUV machines are indispensable. Advanced nodes require the ability to etch ever-smaller transistors into a chip, which allows more transistors in the same physical space. That improves performance per watt, and in the case of data storage chips, increases memory density. Extreme ultraviolet lithography provides the narrow wavelengths of light required for that ultrafine level of detail.

Without EUV, memory producers struggle to manufacture the latest generations of high-bandwidth products that keep pace with next-generation AI accelerator architectures. In other words, access to EUV lithography machines directly translates into the ability to scale up its production of high-end chips and meet the demands of the market.

ASML has a near-monopoly on EUV

ASML (NASDAQ: ASML) is the only company technologically capable of supply of high-volume EUV lithography systems. This monopolistic position means that any major expansion in leading-edge chip production inevitably flows through ASML's supply chain.

Image source: The Motley Fool.

SK Hynix's capital raise therefore should be viewed as a powerful catalyst for ASML. By explicitly earmarking funds for EUV system purchases, SK Hynix is telegraphing that it will convert IPO proceeds into ASML equipment orders. These orders will bolster ASML's backlog and provide enviable levels of revenue visibility into secular AI-driven demand as infrastructure spending accelerates.

Because SK Hynix is a major supplier of HBM to GPU designers, the company's expanding capacity will help support other types of chip production -- creating a virtuous cycle that will further benefit ASML's EUV franchise.

All told, the SK Hynix listing was more than a generic financing event: It sent a concrete signal that the up phase of the memory supercycle will continue to intensify for the foreseeable future. Against this backdrop, expect more funds to flow into the essential pick-and-shovel equipment supporting the foundation of the AI infrastructure build-out.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.