Competitors are about to land on Wall Street; Micron's "sole advantage" may face challenges

In recent weeks, Micron Technology’s stock has underperformed. Especially as its South Korean rival, SK hynix, is set to list in the U.S., its situation is becoming even more complicated.

As the world’s third-largest memory chip manufacturer, Micron logged a strong start this year. Its share price rose cumulatively by more than 45% at one point in January, ranking second among S&P 500 index constituents.

But more recently, the stock has come under clear pressure due to concerns about the memory industry and the uncertainty that the conflict in the Middle East has brought to the broader market. Although it rebounded on Monday, it is still down nearly 20% from its peak three weeks ago, on a cumulative basis.

Meanwhile, SK hynix, an important supplier for Nvidia, has filed an application with the U.S. Securities and Exchange Commission (SEC), planning to list in the U.S. stock market as early as this year, with a financing size of up to $10 billion.

If it ultimately goes forward, it would become one of the largest IPOs in New York by a foreign company. It would also end Micron’s position as the only DRAM-chip supplier listed in South Korea’s U.S. market, giving investors a new channel to participate in AI infrastructure.

Rob Li, managing partner of Amont Partners, a New York hedge fund, said: “Money will move from Micron to SK hynix, because as of now the latter appears to be valued lower.”

Despite Micron’s important position in the U.S. market, it still lags behind SK hynix and Samsung Electronics in the global DRAM market.

According to data from Counterpoint Research, in the fourth quarter of last year, SK hynix’s share of global revenue in the high-end DRAM segment of high-bandwidth memory (HBM) reached 57%, more than double Micron’s.

Even so, Micron’s price-to-earnings ratio is still slightly higher than SK hynix’s. Analysts believe this difference partly stems from the fact that Micron is “the only listed DRAM company in the world’s largest capital markets.”

However, as SK hynix’s ADR opens up to individual investors in the U.S., this valuation gap could narrow.

Kenny Kim, CEO of Meridian One Asset Management, a South Korean hedge fund, said this could also create new opportunities for hedge funds to implement long/short strategies.

“Both companies are pure-play memory manufacturers, but SK hynix is leading in the HBM segment.”

Joe Tigay, a portfolio manager at Equity Armor Investments, said: “If investors only want to slightly diversify their allocation in this area, they may trim part of their Micron holdings in the short term in order to build a more balanced portfolio.”

Despite the recent pullback, Micron’s stock is still up about 28% year to date. Meanwhile, data storage companies such as SanDisk, Western Digital, and Seagate Technology are all among the best-performing stocks in this year’s S&P 500.

From a long-term perspective, Micron and SK hynix’s ADR share-price trends may converge, because listing in the U.S. would not change the fundamentals of either company.

There are also views that, as Micron catches up in the global market, its rate of earnings growth could be faster, and long-term returns may exceed those of SK hynix.

Jung In Yun, CEO of Singapore hedge fund Fibonacci Asset Management Global, said: “In the future, Micron’s stock rise may have a steeper slope. Demand for HBM chips is extremely strong, and the market is in short supply, which creates a window for Micron to benefit.”

（Source: Caixin Finance and Securities）