SK Hynix said on Wednesday that it will buy back and cancel treasury shares worth 40 trillion won, or $28.61 billion. The South Korean chipmaker also said it will use more than 50% of its free cash flow from 2025 to 2027 to give more money back to shareholders.
SK Hynix shares fell nearly 10% on Wednesday before recovering some losses in post-market trading. The shares had reached a record high in June but have fallen since then. Investors have become worried about whether U.S. technology companies will continue spending heavily on artificial intelligence, according to Reuters.
SK Hynix shares fall
SK Hynix has benefited strongly from the AI boom because it makes memory chips used in AI systems. The company is a major supplier of high-bandwidth memory, or HBM, used in Nvidia's AI chips.
SK Hynix and Samsung Electronics are facing growing pressure from investors to return more of their extra cash through dividends and share buybacks. Both companies have made record profits because of strong demand for AI memory chips.
SK Hynix share buyback
SK Hynix said it will buy back and cancel up to 24 million of its own shares. The buyback will take place between August 20 and November 19. Josh Gilbert, an analyst at trading platform eToro, said the large buyback shows that SK Hynix does not appear to expect memory prices to fall soon, according to Reuters. SK Hynix also said it plans to increase its total shareholder returns through share buybacks, share cancellations and dividends.
{{/usCountry}}SK Hynix said it will buy back and cancel up to 24 million of its own shares. The buyback will take place between August 20 and November 19. Josh Gilbert, an analyst at trading platform eToro, said the large buyback shows that SK Hynix does not appear to expect memory prices to fall soon, according to Reuters. SK Hynix also said it plans to increase its total shareholder returns through share buybacks, share cancellations and dividends.
{{/usCountry}}Also read: Why are the Magnificent Seven, including Nvidia and Tesla, losing their Wall Street grip?
The company plans to announce more details about additional shareholder returns when it reports its third-quarter results. Its earlier plan for 2025 to 2027 was to use up to 50% of its total free cash flow for shareholder returns. The new 40 trillion won buyback could satisfy investors, according to Sanjeev Rana of investment company CLSA. Rana also said SK Hynix could announce more buybacks or special dividends later.
Samsung and Micron plans
Samsung Electronics told Reuters that it plans to share details of its shareholder-return policy for this year and beyond very soon. US chipmaker Micron has promised to return 100% of its excess cash to shareholders.
SK Hynix said its net cash stood at around 69 trillion won at the end of the second quarter. The company now has to balance shareholder returns with heavy spending on new factories and employee bonuses.
SK Hynix AI investment
SK Hynix is one of the world's leading makers of high-bandwidth memory used in AI chips. The company has launched one of the most aggressive expansion plans in the chip industry to meet rising demand for AI memory. SK Hynix has pledged hundreds of billions of dollars for chip factories in South Korea. The company also has a long-term agreement to share part of its profits with workers.
Last year, SK Hynix agreed to give workers 10% of its annual operating profit under an agreement that will last for 10 years. SK Hynix and its South Korean labour union are also finalising a preliminary wage agreement, according to a source familiar with the matter who spoke to Reuters. The source said part of the employee bonuses could be paid in company shares.
The big buyback comes as SK Hynix tries to reward investors while continuing to spend heavily on AI memory production. Investors will also be watching whether strong AI spending continues to support demand and prices for memory chips.