SK hynix unveils $29 billion buyback after AI-spending worries

SK hynix Inc. (NASDAQ: SKHY ) stock rose more than 5% in Wednesday premarket trading after falling 9.2% in the previous session.

The rebound comes as investors weigh a major shareholder-return plan against concerns over AI spending and higher interest rates.

Nasdaq futures fell 0.11%, while S&P 500 futures edged up 0.01%.

Unveils $29 Billion Buyback, Boosts Shareholder Returns SK hynix is stepping up shareholder returns with a 40 trillion won ($29 billion) stock buyback.

The company also raised its free-cash-flow payout commitment as investors reassess the outlook for memory stocks.

SK hynix plans to repurchase up to 24 million treasury shares from Aug.

20 through Nov.

19 and cancel them.

In addition, the company raised its shareholder return target to more than 50% of free cash flow.

Previously, it had targeted returns of up to 50%.

The move follows SK hynix's $26.5 billion U.S. listing a month ago.

However, investors have since grown more cautious about the durability of AI infrastructure spending. eToro analyst Josh Gilbert told Bloomberg that the size of the buyback signals that SK hynix is responding to investor demands by deploying its growing cash reserves to boost shareholder returns.

CLSA Securities Korea research head Sanjeev Rana said SK hynix likely hoped its U.S. listing would help close the valuation gap for its Korean-listed shares.

While that has not happened, he said the buyback could help ease criticism from retail investors in Korea.

AI Spending, Rates Remain Key Risks SK hynix is a major supplier of high-bandwidth memory to NVIDIA Corp. (NASDAQ: NVDA ).

As a result, the company has emerged as a major beneficiary of the AI data-center boom.

Still, concerns about AI spending have recently pressured memory stocks.

Higher bond yields have also weighed on technology valuations.

Allspring Global Investments portfolio manager Gary Tan told Bloomberg that buybacks could provide a temporary cushion.

However, he said interest rates remain the bigger driver for memory stocks.

Analyst Outlook SK hynix carries a Buy consensus rating with an average price forecast of $245.50.

Forecasts range from $200 to $320.

Wolfe Research and RBC Capital initiated coverage with Outperform ratings and $200 price forecasts on Aug.

4.

Cantor Fitzgerald started coverage with an Overweight rating and a $300 price forecast the same day.

Edge Rankings SK hynix has a Growth score of 98.26 and a Value score of 59.49 on the Edge scorecard.

The readings point to strong growth characteristics but a more neutral valuation profile.

Top ETF Exposure The NestYield Dynamic Income ETF (NYSE: EGGY ) and NestYield Visionary ETF (NASDAQ: EGGQ ) each have a 4.77% weighting in SKHY.

Price Action SK hynix shares rose 5.34% to $163.93 in Wednesday premarket trading, according to Pro data.

Photo via Shutterstock Read Also: Micron Says Customers Are Scrambling for Memory Even at 'Very High' Prices