(Aug 19): SK Hynix Inc unveiled plans to buy back 40 trillion won (US$29 billion or RM116 billion) of stock and return more of its profits to shareholders in an effort to calm worries about the durability of artificial intelligence (AI) spending.

The memory chipmaker said it will buy back as many as 24 million treasury shares between Aug 20 and Nov 19 and cancel them, according to a regulatory filing on Wednesday. It also boosted its shareholder return pledge to more than 50% of free cash flow, up from a previous target of within 50%. Its US shares rose as much as 7.1% in pre-market trading.

SK Hynix’s buy-back plan follows the US$26.5 billion it raised just a month ago in a US listing, which came around the height of market excitement around an AI rally. But since then, investors have cooled on the trade and begun demanding a handout.

“The size of this buy-back is a strong signal from SK Hynix and delivers something investors have been calling for, putting its growing cash pile to work and increasing shareholder returns,” said Josh Gilbert, an analyst at Etoro. “Lifting the returns target from within 50% of free cash flow to above 50% is the change that will still be relevant long after this week’s price action is forgotten.”

South Korea continues to be the focus of the Asian tech trade, after an investor frenzy that pushed market values of SK Hynix and home-grown rival Samsung Electronics Co to more than US$1 trillion each. The South Korean benchmark Kospi is still posting large daily swings, although the mountain of leveraged trades that drove record levels of volatility has started to unwind.

SK Hynix, a key supplier of high‑bandwidth memory chips to Nvidia Corp, joined a recent sell-off over worries that spending on AI hardware could be fleeting. SK Hynix shares declined on Wednesday in South Korea before the buy-back announcement, tracking losses in US semiconductor and other AI-related stocks as concerns over inflation and rising government debt kept bond yields elevated. The threat of higher borrowing costs is adding to market worries amid ongoing uncertainty over the Iran war.

“Buy-backs may offer a temporary ‘cushion’ for memory stocks, but the bigger driver remains interest rates,” said Gary Tan, a portfolio manager at Allspring Global Investments. “Until long term yields stabilise, valuation and shareholder return support alone is unlikely to prevent continued volatility.”

Uploaded by Tham Yek Lee