Why SK Hynix Plunged Today
Key Points
SK Hynix sold off hard along with the AI chip sector today.
Adding insult to injury, a Wall Street analyst says the company's export license needed to send chipmaking equipment to its NAND fab in China is being held up.
Demand is booming, so a delay in supply could lift NAND flash prices and allow more revenue and profits to go to competitors.
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Shares of memory maker SK Hynix (NASDAQ:SKHY) plunged 13.4% on Thursday, amid a bloodbath for the broader semiconductor sector. It appears investors were caught off guard by the magnitude of the Democratic "wave" in Tuesday's midterm election, and now might be contemplating limits or bans on data center build-outs. Some post-election statements by Democratic lawmakers have also fed into those fears today.
Additionally, it appears that SK Hynix is having problems with the U.S. Commerce Department. The agency has continued to hold up export licenses for chipmaking equipment shipments to SK Hynix's NAND flash plants inside China.
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Wedbush publishes a dour note on SK Hynix's China plant
In a note today, sell-side analyst Matt Bryson of Wedbush Securities wrote that the U.S. Commerce Department is holding up the export license for chipmaking equipment to be sent to SK Hynix's NAND flash facilities in China. Even though SK Hynix is a South Korean company, it appears the Commerce Department doesn't want leading-edge equipment being sent into the country. The controversy may also be holding up SK Hynix's plan to invest in a major manufacturing hub in New York.
If SK Hynix is restricted from importing the equipment, its supply could be curtailed relative to competitors in the NAND flash industry. Given the unprecedented memory and storage boom we are currently seeing, that could mean missed revenue and profit for the company.
Investors shouldn't feel too sorry for the company, however; after all, SK Hynix just reported absolutely booming results and is in the lead in HBM memory, the DRAM memory that’s essential for the AI build-out.
Image source: The Motley Fool.
Breathtakingly cheap
After today's evisceration, SK Hynix now trades at under three times next year's earnings estimates. Clearly, investors don't believe those earnings will materialize, or that they will virtually disappear in 2028.
However, if data center and AI regulation winds up being less than feared, there is significant upside in SK Hynix, its memory cohorts, and semiconductors more broadly.
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Billy Duberstein and/or his clients have positions in SK Hynix. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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