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Shares of South Korean chipmaker SK Hynix closed higher on Friday, reversing losses of as much as 3% earlier in the session after the company's decision to halt a review of a potential U.S. initial public offering for its subsidiary Solidigm.
The stock reversed earlier losses to close 4.4% higher.
Josh Gilbert, lead analyst for APAC at investment platform eToro, said the stock's rebound suggested that concerns over a potential Solidigm IPO had been weighing on investor sentiment.
"SK Hynix shareholders have got the outcome they were pushing for," Gilbert said, adding that "in the short term, it removes a governance worry and keeps Solidigm's value inside the company."
He explained that SK Hynix faces the challenge of funding Solidigm's growth without compromising share buybacks and dividends, as the company needs to demonstrate a credible funding plan as it prepares to report earnings next week.
"Solidigm will halt its review of potential pre-IPO and IPO options," the company said in the statement after assessing recent capital market conditions and share price trends, while also exploring various funding options to finance a new U.S. semiconductor fabrication plant amid growing demand for AI memory.
The chip manufacturer said an IPO could have helped fund Solidigm's expansion while providing greater financial flexibility for shareholder returns, including dividends, share buybacks and share cancellations.
However, financial market volatility had increased and contributed to a broader correction in semiconductor stocks, prompting SK Hynix to reassess whether an IPO would benefit existing shareholders.
SK Hynix said that Solidigm's existing production facilities had limited capacity to meet rising AI-driven memory demand, underscoring the need for additional manufacturing capacity in the U.S.
The decision also follows regulatory scrutiny in South Korea.
The country's financial regulator said Monday that a potential U.S. listing of Solidigm could violate South Korean rules restricting dual listings, according to Reuters.
Financial Supervisory Service Governor Lee Chan-jin said regulators were examining whether the IPO would require a review under the country's rules designed to protect minority shareholders.
SK Hynix said Solidigm's investment needs remain unchanged and that it would continue exploring alternative financing options to support the subsidiary's growth and enhance shareholder value.
The announcement comes as U.S. technology stocks face pressure amid worries over AI spending.The tech-heavy Nasdaq Composite slid 2.6% on Thursday, its worst session since June, while Nvidia fell 4.4% and Advanced Micro Devices dropped 8.1%.
Amid a sell-off in memory stocks, Nvidia CEO Jensen Huang told CNBC Thursday that he does not expect an oversupply of memory chips by 2029, despite concerns over weakening demand.
AI data center stocks have also come under pressure amid growing concerns over financing risks and the pace of AI infrastructure expansion. Shares of CoreWeave plunged 10% on Thursday, extending their monthly decline to 36%, while Australia's NextDC tumbled nearly 40% on Wednesday after cutting its earnings forecast.
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