SK Hynix Shares Surge 30% to Daily Limit in Korea, But ADR Falls 3.6% – Divergence in AI Buying Sentiment

SK Hynix's stock price soared sharply in South Korea on Friday (31st), rising alongside the Kospi index, signaling renewed capital inflows into artificial intelligence (AI)-themed stocks—though this bullish momentum did not extend to the U.S. market.

SK Hynix's Seoul-listed shares surged 30% on Friday, closing at 1.718 million Korean won per share (approximately USD 1,197), reaching South Korea's daily price fluctuation limit. In contrast, its American Depositary Receipt (ADR) (SKHY-US) closed down 3.6% on Friday at USD 143.69 per share.

In the South Korean market, SK Hynix's strong performance drove peer Samsung Electronics up 27%. With both memory chip giants surging, the Kospi index finished Friday with a robust 18% gain.

Year-to-date through Friday's close, the Kospi has risen 57%, making it the world's best-performing stock market, though volatility has been extreme. According to LSEG data, three of the four largest single-day declines in Kospi's history over the past decade occurred within the last five weeks.

South Korean retail investors continue aggressively buying tech stocks like SK Hynix, often using high-risk instruments such as leveraged ETFs. Leveraged ETFs amplify daily price movements through derivatives like options and swap contracts—not only magnifying gains but also increasing losses. Because larger gains are required to recover from losses, and because positions must be rebalanced daily at market close, returns are gradually eroded over time.

Markets had initially hoped that the correction in AI-themed stocks, along with regulatory and political pressures in South Korea, would curb leveraged trading and reduce market volatility. However, the sharp swings seen in SK Hynix and Samsung Electronics on Friday suggest that South Korean investors still have ample funds, and if they again heavily buy leveraged ETFs to recoup prior losses, future market volatility could intensify further.

Nonetheless, this does not necessarily mean investors should avoid SK Hynix ADR. The stock briefly rose as high as USD 162.65 per share during Friday's session before giving up its gains and turning negative. Each 10 units of ADR represent one ordinary share of the South Korean parent stock.

Due to the large U.S. investor base and structural barriers to converting ADRs into South Korean ordinary shares, SK Hynix ADR has historically traded at a premium compared to its domestic shares.

Moreover, recent significant share sales by Situational Awareness—a hedge fund led by Leopold Aschenbrenner focused on AI investments—could help alleviate upward pressure on SK Hynix ADR. According to The Wall Street Journal (WSJ), this hedge fund, which held substantial SK Hynix stock, was forced to sell part of its holdings in recent weeks due to funding needs.