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- [00:01]
Narrator/Announcer
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- [01:33]
Narrator/Announcer
Bloomberg audio studios podcasts radio news.
- [01:43]
Bailey Lipschultz
Bloomberg Tech is live from the heart
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Narrator/Announcer
of Silicon Valley with Ed Ludlow in San Francisco.
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David Gura
Welcome to a special edition of Bloomberg Tech. I'm David Guru in for Ed Ludlow who I should say is not far away. He is down at the Nasdaq because all eyes are on SK Hynix is US listing today. This the biggest ever US listing by a foreign company and we are gearing up on this Friday. One take a look at shares of the NASDAQ 100 down this morning. Semiconductor index down as well. Stocks really wavering here ahead of the debut of this listing on the nasdaq. Want to look at some chip stocks as well, some rivals of SK Hynix if we can, of course, a lot of interest in sort of where they are, how they're performing on this Friday. Micron down 1.3%. Intel down 2.9%. Nvidia up slightly again on this Friday. Want to get some context here, some perspective from Bailey Lipschultz. He's a Bloomberg Tech equity reporter along with Mandeep Singh, who's a senior analyst at Bloomberg Intelligence. And Bailey, let me start with you. The offering price here $149. The indications are this is going to open at $175. What does that tell you? Just walk us through what we can expect here in the minutes and hours ahead.
- [02:51]
Bailey Lipschultz
David. It shows us that the reporting we had last night that there were $200 billion of demand is pretty darn online. The main thing to keep in mind is indications are only that when we saw Space X go public, the indications were it opened up 30% and ultimately opened up 10% or 11%. So these numbers can move around quite quickly. The main thing to keep in mind, this is a record setting listing for a foreign company here in the us this is a big deal. Again, it was more than seven times oversubscribed. It drew in interest from fundamental investors as well as our typical IPO buyers. The one thing to keep in mind throughout today and really going into next week, we are looking at a company that is a new listing here in the US So limited supply available for investors. As you can see, 117.9 million ADR, not really a lot of shares available relative to the float. So you can be bracing for some volatility that is outsized against the tape that has seen semiconductors really moving pretty sharply in either direction for the last few months.
- [03:52]
David Gura
Noting that volatility even as we wait for the open here. And Mandeep Singh, let me turn to you and just ask you about the motivations for the South Korean company to get into the US capital markets. Simply more access to cash. Does it say something about their designs, their eagerness to get into the US market more fully? How do you read what they're doing here today at the nasdaq?
- [04:10]
Mandeep Singh
I mean I almost feel like these companies have become more household names, you know, with this cycle. Nobody knew about SK Hynix, you know, probably two or three years back and suddenly everyone is talking about memory shortages and how these companies have fundamentals that can really last a while in terms of the durability of this cycle versus the prior cycles. And so from that perspective, you know, having the ADR listed here will create more awareness among especially long term investors who would want a piece of this. And I think the timing seems to be perfect for, for the listing here.
- [04:50]
David Gura
Maybe not a household name, but a big part of the pantheon of memory providers here situated for us, if you would. So you've got SK Hynix, you've got Samsung, you've got Micron as well. Where is it in that universe?
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Mandeep Singh
Well, so I look at SK Hynix as one of the primary providers to an Nvidia. So even though it's an oligopoly with three players, but when you look at, you know, which of the three Nvidia has used the most for their architecture, so far it's been SK Hynix. And that's why in their IPO document, they say they have a 57% share in HBM. And HBM is where, you know, you can make a direct connection to the AI data center footprint. So from that perspective, I do think, you know, the Nvidia aspect is huge when it comes to this listing.
- [05:42]
David Gura
Bailey, I want to ask you about what the price of this is relative to the stock trading on the South Korean market. So there's no discount here if you're to buy the ADR on the NASDAQ today. What does that tell you about this company's confidence?
- [05:55]
Bailey Lipschultz
It's the expectation, David, when we saw this price at about a 3% premium, that was kind of baked into what management had been being vocal about on the road. When meeting with investors and their bankers, when they're talking to clients who participated in the ipo, the main thing to keep in mind is Taiwan Semi trades at about an 18% premium relative to its Taipei listing. So if you do the math on where SK Hynix closed in Seoul and could call it apples to apples, that's about $171 per ADR here in the US so that obviously opening potentially higher than that. Again, there are a number of factors at play. There's a lot of excitement to Mandeep's point on how SK Hynix fits into this. Obviously, the main thing people also have been keeping an eye on, and we've reported on AD nauseum is that gap from a premium perspective or valuation perspective relative to Micron.
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Interjection Speaker
Yeah.
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David Gura
So a lot of volatility here, a lot of confidence as well, just looking at that stock, how it's traded in South Korea, a lot of volatility in that, in that stock in particular here over these last few weeks. Want to bring back Bloomberg Tech equity reporter Bailey Lipschultz now, along with Mandeep Singh of Bloomberg Intelligence. And Mandy, let me start with you and this issue of cyclicality. You know this sector so well. And the chairman laid out, we associate the cycles, the booms and busts of memory with if you have to buy a smartphone, if there's an uptick in that, or in computing or any number of electronics in the home. He said in that conversation, the. The AI sector, this era presents something different.
- [07:16]
Mandeep Singh
Yeah. And he kept hinting at how agent AI could be a huge unlock in terms of memory demand. He mentioned kvcache, the key value cache that agents use a lot more than what you know, the humans would end up using in their chat bot experiences. So in his mind, you know this, the drivers of this cycle are durable in terms of extending the length of this cycle. He did say, you know, the stock market can run up but in terms of the fundamentals he feels a lot more confident. And he talked about, you know, adding a certain gigawatt capacity both within Korea and outside. So it sounds like this company is going to ramp up its Capex in a big way. I mean they're investing what, $35 billion. That's the reference he used. They're making that kind of money in a quarter. So you know, from that perspective there is room for capex to go high if he's that confident about the business.
- [08:13]
David Gura
And if you and I have talked so much about these bottlenecks and the amount of demand that's placed on a company like SK Hynix, fascinating to hear him talk about how he likes the long term deals that have been animating this company. Talk a bit about that. Their approach to dealing with their customers.
- [08:28]
Mandeep Singh
Yeah, I mean traditionally you know, their customers would PrePay for a one year contract but now they're talking about three to five year contracts with the customers where the prepayment could be up to 30%. And you know, Micron has even locked in the prices. They haven't done that. They are more in that camp of, you know, letting the spot prices determine what companies have to pay. But look, if you want to be a big customer of SK Hynix, it's very clear you have to have a three to five year commitment and you have to prepay certain amounts. So from that perspective they seem to have a lot of levers this time around in terms of showing some backlog to investors and you know, that's what drives the Capex investments. I think that he's planning to make
- [09:14]
David Gura
Bailey turning our attention back to this ADR priced at 149. The latest indication is it would open around 171. You heard from the chairman talking about the prospect of there being more ADR in the future, maybe enlarging that number some his appetite for maybe hitting the debt markets as well. Of course he said his first priority here is, is stabilizing that that stock price. But what did you learn from him from that conversation about the way that this company is going to approach the capital markets going forward?
- [09:40]
Bailey Lipschultz
Now David, I think it's an interesting point that there is seemingly an interest in selling adr because the question has been if you're selling shares here in the us, is it strictly to squeeze or narrow the valuation gap with a Micron? Is it trying to entice a new investment group or is it a another venue to potentially raise capital? So with the notion that they could sell ADRs in the future, once there's some form of stability, that's a big deal for U.S. investors. That'll be a big deal to building out some of those ambitions that Mandeep was mentioning. When you talk about a company that is pretty much taking over from the hyperscalers in terms of bringing in free cash flow, the question then is how do you invest and stay ahead of competitors or at least better compete with your biggest peers? And that question comes back to funding. Is it coming from the free cash flow from these sales or is it going to be tapping 80 hours? Is it going to be selling US dollar denominated debt again because these are businesses that cost a lot of money.
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David Gura
Bailey thank you very much. Man Deep thanks to you as well, Bailey Lipschultz, mandating joining me here in New York as we begin to analyze and pick apart the conversation that Ed Ludlow had there with the chairman of SK Group, CHA1. We're going to continue to do that over the course of this hour. Nancy Tangler, the CEO and CIO Laffler Tangler Investments, is going to join us next with her analys of SK Hynix's US Debut that's coming up on Bloomberg Tech.
- [11:04]
Narrator/Announcer
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- [11:34]
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David Gura
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- [12:45]
IBM Representative
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- [13:15]
David Gura
Welcome back to Bloomberg Tech. David Gura in for Ed Ludlow who is at the NASDAQ on this Friday. Let's get the latest on where markets stand.
- [13:21]
Anand Bloomberg Reporter
The Bloomberg siharanonda Hi David, we are still waiting on SK Hynix's ADR to begin trading but as we await that we are seeing the broader market treading water with the NASDAQ down about 2.10of1% while the Philadelphia Semiconductor Index is down about 9.10of1% as investors continue to flip flop on whether those chip makers can keep their pricing power. And here's a check on some of the biggest names in the chip trade as we get ready to absorb all this new supply from SK Hynix. We are seeing Micron, intel and Western Digital falling and while in video is bucking the trend, rising two and a quarter percent. But Micron is the one to watch here. So since until today it was effectively the only US listed pure play way to invest in AI memory.
- [14:11]
David Gura
David here, thank you very much. I see here and on joining us here in New York, we're going to stay with chips SK Hynix. His NASDAQ listing comes as the industry is facing a big memory bottleneck. Nancy Tangler, CEO and CIO of Laffer Tangler Investments joins us now for more. Nancy, Ed Ludlow talking to me before I sat in on the show. He said I have to ask you if you're a buyer of this stock, as you look at this, as you look at this opening of this ADR at the Nasdaq, is it something that you are interested in inherently?
- [14:37]
Nancy Tangler
Well, not really, but thank you for asking we, we, it's not because we don't like the company. We are exposed through Micron. Some of the suppliers like glam. So we've got a pretty full allocation to the, to the space and the segment. So I think it's interesting. I'd like to watch it. Unlike Space X where we were in on day one because it fits a theme in our thematic portfolio. We're going to, we're going to sit back and just watch this one a little bit. But I love the interview, great interview.
- [15:10]
David Gura
I will pass it along to Ed. In terms of the space, in terms of the sector, what do you see there? I mean I hear so much about the bottlenecks. We heard from the chairman as well, just about the way that they're navigating the demand that they have for their products. Talk a bit about sort of how you're seeing this play out here in the next months and years.
- [15:26]
Nancy Tangler
Yeah, we're, you know, so I hear all the bubble concerns. I like to hear that because it's, it's different than what we saw in the 90s where no one was concerned about anything and they just kept buying. But I will say this, what we're hearing consistently across companies is that, that they have backlogs, that they have demand out three to five years, that they are locking in long term contracts. You heard the same from SK's chairman. He basically said, you know, we're going to double memory supply in five years. And our clients are saying, our customers are saying that's not enough, that's important. And I think goes to the question of is this a sustainable build out. And we think this is the fourth industrial revolution. We are, are seeing an economy in transition and all of these technology G's not just I will change the way we live in the future.
- [16:22]
David Gura
I want to pull up the big number that we've picked for the day. That's, that's $350 billion. And what that represents is kind of the aggregate amount of debt obligations in the last five years for Alphabet, Amazon, Metta, Microsoft and Oracle of course the five biggest spenders on new data centers in the U.S. nancy, what's your reaction to that number? That has been some cause here for agita or for anxiety among some investors seeing the way in which these companies are building in this moment in this area, as the chairman put it.
- [16:51]
Nancy Tangler
Yeah, well, so David, I mean when I grew up in this business Capex spending was good. It showed optimistic optimism from management. If you look at these companies, yes, I know they've been Issuing debt. But the actual amount of debt from technology as a percent of all the the debt, the common debt indices actually went down in May, probably went up a little bit in June, but it's at six and a half percent. And these companies represent 38 to 40 depending on how you count it, percent of the S and P. So I'm not concerned that they're overspending. I saw the downgrade on Oracle today. You know, they have committed to staying above investment grade. We'll see. But these companies have the free cash flow and you know, even with all the speed spending, you've got Microsoft at 32 I think billion in free cash flow this year and 40 +billion next year. It might be flipped but it's important I think to keep this in perspective. This is not profligate spending. It's not government spending, that's for sure.
- [17:53]
David Gura
Let me ask you lastly, we got about 30 seconds left. What this moment represents for US capital markets. The fact that this company has come to the US to, to sell these ADRs. What does that say? Just about the importance or Primacy of the US capital markets today.
- [18:05]
Nancy Tangler
I think you're 100% right, David. This is the market you want to be exposed to if you're, especially if you're an AI company. I think the chairman said, I think he said this might have been ed that that the AI is understood by US investors and that that is why it's important for them to be here. It also I think puts a toehold in which is what Hock Tan did many years ago re listing AVGO here. So I think there's, there's politics behind it which is a good thing for the company and there's a ready market of eager buyers.
- [18:41]
David Gura
Nancy, always good to talk to you especially as we await this opening. That's Nancy Tangler, CEO and CIO of LafferTangler Investments joining us on this Friday. Welcome back. The SK Hynix listing suggests that demand for memory remains strong. But our next guest says demand may be reaching its peak. Yvonne Delevska is the founder and chief investment officer of Spier. Its flagship ETF targets related investments on a Great to see you. Something I'd really tried to pin the chairman down on was the notion of how long this bottleneck is likely to last. And I'm curious sort of how you see that. He kind of presented an optimistic light. They're building companies are trying to do more to allay that bottleneck. Do you see it subsiding here in the months and years Ahead.
- [19:23]
Yvonne Delevska
Well, David, we don't see demand subsiding. However, the capacity constraint is at its peak right now. So this is why you're seeing prices spike. So even if demand continues to grow here, which we believe it will, if you don't, if you also have capacity additions coming at the same time, that will offset that demand growth. So we think this is the peak of the constraint that we see. And therefore, if prices start peaking, you're going to see the stock starting to, to taper off. But we don't see a big fall off. We think demand will continue. So that's really the fundamental case for memory.
- [19:59]
David Gura
Where are we in this evolution, this growth story of AI? So we talk about the era, this kind of broad umbrella. You draw a distinction between kind of the model stage of where things are in this move toward more agentic world. Are we there yet? When do we reach it? And how does that color or change the way that we look at memory?
- [20:16]
Yvonne Delevska
So, David, really the model training era needed a specific type of memory, which is called high bandwidth memory. That's a small subsegment of the broader memory trait. And that's really what grew during the model training era. As we entered the agentic era, we are seeing a lot broader demand for memory. So agents like, act in a very similar way to humans. So they need to keep context, they need to keep working memory, which is why you're seeing DRAM prices skyrocket. So the more traditional parts of memory are required for a gentle AI, and that's what's lifting basically the entire memory trade here, not necessarily just hbm.
- [20:56]
David Gura
Are investors looking at that with enough nuance? I think there's been a clamor and eagerness to get into this space. The infrastructure surrounding AI, are they thinking through it well, enough sort of where all of this is headed and what infrastructure is needed?
- [21:08]
Yvonne Delevska
Well, David, I think that's really key for investors to do here. To understand the entire value chain. We're basically making this big push into investments, into adding memory capacity. So rather than investing in the chip suppliers, a better risk reward would be to invest across the value chain and the companies that provide the semicap equipment. So basically, I think the idea from here is that there is one kind of investment, investment wave where whatever you buy will do well and then the next trade is to actually understand the different parts of the value chain and pick your spots.
- [21:41]
David Gura
When I ask you somebody who has ETFs and lives in this world, there has been such enthusiasm for getting into this sector through the South Korean market. How does this having these ADRs change the way that we approach companies that are not domiciled, not based in the US but have this presence in this global marketplace outside of the U.S. well
- [21:59]
Yvonne Delevska
David, I think it's very important for U.S. investors to have exposure to some of these larger high quality companies that are global. So I think that's a very positive thing that an ADR is getting listed. I think the reporting standards in the US are also significantly better than elsewhere. So that provides an extra layer of, of security for, for US investors. So I think that's a pretty positive trend here that investors can get access to SK Hynix, which is one of the highest quality names within the three
- [22:30]
David Gura
memory suppliers, Micron and Samsung the other. Let me ask you finally just about the bubble. Ed brought it up with the chairman during their conversation and he said there's this kind of disconnect between the real world and the stock market. He said there's still demand in the real world. How are you thinking about the prospect of this being perhaps more effervescent, perhaps more of a bubble than, than investors would like to?
- [22:51]
Yvonne Delevska
Well, I think people are really misunderstanding this bubble concept. What we are really seeing more from our end is different investment waves. So we are really seeing there was one cycle where we had a lot of GPU investments, a lot of big data centers. Now we're entering another cycle where Agent Ki needs a lot more CPUs, they need a lot more networking to connect to each other. So we're really seeing a lot of different investment waves. On a day to day basis they trade all in sync. But if you look on a one to three year basis, you're going to see big divergence between the mega caps versus some of these component suppliers that provide some of the more interesting ways to play the trade.
- [23:30]
David Gura
I want to thank you very much. That's under Levska joining us here on set in New York, CIO at Spear as we continue to talk about the interview that my colleague Ed Ludlow just did with the chairman of the SK Group, that's Che Taiwan down at the Nasdaq as we wait, the opening trade of those ADR which are being listed on the NASDAQ today. And again the chairman talking about the notion of there being a lot of conversation about a bubble here when it comes to AI in particular, drawing that distinction between the real world and the stock market and saying at least from where he sits, AI has spiked a lot of demand for SK Hynix. And what he sees is the most important thing to do here in the months ahead is to lower token costs and he does in fact see those costs coming down.
- [24:14]
Mandeep Singh
That actually requires a better return. So once we have the better return
- [24:18]
Yvonne Delevska
then there is a more demand.
- [24:20]
Mandeep Singh
So, so first thing is that we have to keep the stock price stable
- [24:25]
Yvonne Delevska
and well, hopefully in a long run
- [24:29]
Mandeep Singh
that, well, we can have that over upside potentials.
- [24:33]
David Gura
First things first, keep the stock price stable. Welcome back to Bloomberg Tech. I'm David Guray in for Ed Ludlow. He is at the NASDAQ this morning. I was SK Group Chairman Che Taiwan in our interview less than an hour ago. This SQ Hynix is US listing is happening today, the biggest ever US Listing by a foreign company. I want to get the latest on markets of Bloomberg's here. Anand here.
- [24:52]
Anand Bloomberg Reporter
Hi David. Well, as we look at the broader market we can now see that the NASDAQ has flipped. It is now positive up about 1.10of1% while the Philadelphia Semiconductor Index has trimmed its losses now down just 1. 10 of 1%. That's said this remains one of the most volatile corners of the market. Jonathan krinsky over at BTIG had this amazing stat that the stocks has swung up 3% or down 3% 15 times over the last trading sessions. We haven't seen that since the year 2000. And now let's take a look at some of the biggest names in the chip trade and how they are performing. Micron Intel Nvidia will flip the board, but they were lower earlier. They are still falling. Micron down about 1% in video and Western digital bucking the Trend. Nvidia up 2.8% as we begin, as we await to absorb all this new supply from sk, Hynix still waiting.
- [25:47]
David Gura
Thank you very much. Appreciate that update on the markets and those chip stocks. We want to go back to the Nasdaq where Bloomberg's Ed Ludlow is standing by. Ed Brevaro interview there that you just did, your sense of where things stand here and your main takeaways from that interview that just took place.
- [26:00]
Ed Ludlow
Well, I think we're very close to the start of trade and the latest indicating opening for The ADR is $170. They price at 149. So it's about a 14% premium. There was demand there, right. What was really interesting in the interview and you guys played that that soundbite. There's already questions in the market about how SK uses the ideas on a sort of more regular and ongoing basis to raise capital. So like the record, as you put it they raised $26.5 billion. It is a record for a first time US share sale by a foreign company. But if you look at where SK Hynix is committed in terms of the capital commitments to expand capacity, the various projects it has, and SK Group more broadly across the air stack, $26.5 billion doesn't seem like that big a number. We're just looking right now for the start of trade to happen any minute. As I said, the indication, $170 per ADR, the pricing at 149. I think what Chairman Che said very clearly right was that they want to see price stability, they want to take a longer term view before they decide the when and how much of tapping. We also got into the idea more broadly in capital markets of bond issuance, which is like, well, at the heart of the history of the memory game. Back in 2012, at the time that Escrow K acquired Hynix. It's a different world now, less cyclical. It's still cyclical. There's a lot to unpack. We'll get to that later.
- [27:24]
David Gura
All right, Ed, thank you very much. Ed Ludlow down at the nasdaq, he has another interview coming up here. Do stay with us. And I want to get back now to Bailey Lipschultz, Bloomberg Tech Equity reporter, and pick up on what Ed was just saying a moment ago. That is the chairman's emphasis on getting price stability, stability of these adr. And maybe you can give us some insight into the challenges of that going forward. Of course, the point of reference for the so many of our viewers is the Space X IPO of just a few weeks back and we saw Newtonian physics in stark relief there. What goes up must come down, I suppose. What lessons can we take away from. Yes, that listing and how much of a challenge is it for this company, for a company to manage a listing like this one?
- [27:59]
Bailey Lipschultz
Well, David, the difference is Space X was selling shares for the first time. There was no reference price. There was nothing really other than betting on Elon and kind of putting that idea together. SK Hynix does still trade in South Korea, so there at least is some floor and some real sense of valuation. And this is a company that's been public for quite some time, as Ed had mentioned. The big question. To your point though, we saw Space X open and trade much higher in the first two days and still trading around where it initially opened at. That's not great volatility, but not a terrible outcome. You look at Sarah Bross, a chip maker that went public a number of weeks ago. Similar tremendous opening, first day breaks, issue price a number of weeks later after earnings. There's a lot of volatility in the chipmaking space. So if you're SK Hynix and you're, if you're an investor who took a position today, the big expectation is you want it to maintain the premium relative to the South Korean shares. Again similar to Taiwan Semi. You don't really want to see the gut wrenching volatility to the up and downside.
- [28:56]
David Gura
We are waiting of course the start of trade for SK Hynix is ADR on the Nasdaq. You can see there on the left of your screen group gathered there of executives and others at the NASDAQ here in New York City awaiting the start of trade. It was priced at $149 per receipt. We have seen some vacillation in terms of what the expectation is for the open of those shares here as the morning has gone on. The latest indication I believe is $171. But as we were just talking about with Bailey Lipschildz, these things tend to fluctuate. There's a lot of volatility between when a listing is priced and what happens indeed when they do start trading. Bailey, walk us through here. As we see the applause there may be an indication of the stock start of trade here. In fact, I think that is we see SK Hynix opening at $170 again, the IPO price $149, cheering flags waving. An indication there on your screen of the current price, $172.49. Moving upward again from that opening price of $149, I should say the price that was targeted there by the company, $149. Bailey, walk us through what happens next here. This is, this is a process of digestion that takes place here over the next few few hours.
- [29:57]
Bailey Lipschultz
Isn't is in. David, back to your point on stability again. If you use an Apple to apples comparison, that 18% premium that we see for Taiwan Semi equates to about $171 for SK Hynix. So opening essentially in line with that premium, the big question to your point is do we maintain kind of a floor? If you're a banker or if you're a market maker on this, you want it to stay in that 170 to 173 range, maybe a little bit below. But the big kind of mark of death, if you will, that we've seen with a number of these deals is initial Russia buy orders, retail pouncing because they make a lot of market orders. You see a stock start to shoot higher, maybe there's a volatility halt, and then you just see a lot of chop. That's one thing that these underwriters and that these market makers are going to try to avoid. Again, it's a completely different beast though, because it is a more than $1 trillion market cap company. It does publicly trade in South Korea, so it's a bit of a different beast. But all things considered, just looking at the first few opening trades, what I'm seeing, I think most bankers and everyone on this deal would say as of now is a roaring success.
- [31:02]
David Gura
Once again, the largest ever US listing by a foreign company. Looking at SK Hynix now trading on the NASDAQ, the price $149, seeing it trading around 170, so opening about 14% higher than what was expected by the company. Again, a $26.5 billion ADR here on the NASDAQ. Bailey, before I let you go, you heard the comments from the chairman there, just about the prospects for further expansion, their interest in maybe growing the size of this adr, tapping the debt markets of what acute interest is that to investors at this point? Again, as they're processing all of this, as they're trying to put a price on this company, relative what they've seen in Seoul, how much are they thinking about the prospects of again, another ADR or larger ADR going forward?
- [31:40]
Bailey Lipschultz
It's certainly top of mind. Again, this is a different beast. So you have really one way fungibility. So you can take those South Korea shares and convert them into adr so that can expand the available shares for trading. That's different than what you would see with the Space X where people are circling earnings and any kind of expectation around a lockup rush for investors to sell stock. The big question though, to the chairman's point, if we look further out, if we look a year out, when it's most likely in the NASDAQ 100, does that create more systematic demand that allows them to tap investors, raise capital, kind of bolster their balance sheet, but also further expand the float. Because right now, again, we are looking at a pretty tight float just because it is an ipo. So about two and a half percent, call it of the total shares available for trading, that can lead to volatility. You want to get that to a bigger, bigger piece of the pie.
- [32:30]
David Gura
The last question I said that was last one, this one, truly. If I'm sitting in Boise at Micron's headquarters, if I'M in Seoul at Samsung's headquarters. How I processing what's happening here? What does this mean for the broader memory making ecosystem, the broader global memory making ecosystem?
- [32:44]
Bailey Lipschultz
I think for Micron, it's game on. You've been trading at a premium, SK Hynix. This is their ability to narrow that premium. If you're sitting in Samsung's offices, I imagine you're thinking about what this could look like for you. We know Kioxia, the Japanese company, is planning on listing in ADRs sometime in the first half of next year. Is this the start of a trend? Is especially if we aren't in an AI bubble and this demand seemingly can be no longer cyclical but more fundamental. I think that's the question that those different teams are asking themselves.
- [33:12]
David Gura
No doubt you heard what I did, Ed. Asking the chairman of SK Group if he thought they could catch up to Samsung. And he demurring there a little bit saying that's not the priority right now. How much of that was bluster, do you think? How much do you think that that kind of binary competition between these two South Korean giants is really front of mind here?
- [33:29]
Public.com Representative
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- [33:29]
David Gura
To the chairman of SK Group, at the company as a whole, everyone wants to win.
- [33:34]
Bailey Lipschultz
David. Right. You've been covering markets long enough to know that you want to beat your rivals. I think again, this is a moment in time that they now have the branding, they are now traded on the nasdaq. They now are kind of opening up their company formally to U.S. investors, to U.S. retail investors. That's a big win. It goes back to the debate anthropic versus Open air and what that means. I think that's a big step forward. And whether or not people obviously know who SK Hynix is, this is a big step towards that name recognition which Mandeep Singh had been making a few segments ago.
- [34:05]
David Gura
Yes, indeed. Many will know more about it today. And we see SK Hynix again priced at 149 now trading at close to 175. So up 17% from that initial price. And Bailey, I was struck by the way that the chairman talked about the stakeholders to whom he's responsible. And you've, you've listened to many chief executives chairman talk about this issue, but he says he has so many stakeholders. There are customers, there are shareholders, there are employees. Of course, the ADR is another one. Perhaps you could talk a bit about striking the balance after a moment like this one. Again, not a traditional IPO by an American company, a company domiciled here, but the way in which this opens the door to, I guess, having to prioritize one, perhaps more of those stakeholders more than in the past.
- [34:48]
Bailey Lipschultz
Well, David, I think the thing that's interesting, when we look at this entire ecosystem, you think about the to your point and to the chairman's point, customers matter. You want to maintain a terrific relationship. We've had a lot of conversations over the last year, last year and a half about this notion of circular financing. Obviously that steps away from what SK Hynix is doing, but it's all part of a balance. As much as we've seen a rampant jump in demand for memory chips, lead leading to jump in profits, leading to soaring stock prices, you still need to keep a balance with customers. This is an ecosystem that really does win. When everyone is performing better and firing on all cylinders, the big question comes back to is this going to play out like so many cycles of the past where there's a bottleneck now that gets addressed ultimately and then someone's left holding the bag.
- [35:34]
David Gura
The ticker. Sky SkyV. Excuse me for the time being. That's slated to change here in the days ahead. SK Hynix now trading at the NASDAQ $172 a share, again priced 149. I'm grateful to Bailey Lipschultz, my colleague here at Bloomberg News, for joining us as we saw the beginning of trade here in New York. Coming up, we're going to go Back to the NASDAQ. Ed Ludlow is going to sit down with NASDAQ's president, Nelson Griggs. That's coming up on Bloomberg Tech.
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- [38:09]
David Gura
Welcome back. I want to go back to the NASDAQ now where Bloomberg's Ed Ludlow is with the president of that exchange, Nelson Griggs. Ed, over to you.
- [38:16]
Ed Ludlow
Nelson Griggs is NASDAQ president. And that went about as well as it possibly could have done, right? Yes, yes it did.
- [38:23]
Yvonne Delevska
Yeah.
- [38:24]
Ed Ludlow
Talk about the experience of it. You know, it's a record in terms of your first time US share sale for a foreign entity. We keep saying that.
- [38:32]
Interjection Speaker
Yeah.
- [38:32]
Ed Ludlow
But the mechanics of it feet difficult to pull off.
- [38:36]
Interjection Speaker
Well, I think a lot of the mechanics will be the underwriters. So let's give them all the credit in the world. JP Morgan running this, this transaction primarily as a stabilization agent that was stabilizing this trade. But they were the orchestrator, let's call it that. You know, our job is to provide the capacity, the technology you saw behind you, the human intelligence and making sure that everyone one knows what's happening with full transparency. So the, you know, all the book runners can communicate with their customers which is, you know, the buy side investors who are making the bet on celebrations
- [39:05]
Ed Ludlow
continuing for a while.
- [39:07]
Interjection Speaker
I think.
- [39:07]
Ed Ludlow
No, it's good, it's interesting. Like this isn't very sophisticated but it's a Friday, you know, does that play into it at all? What are we seeing in the activity around that?
- [39:16]
Interjection Speaker
I think most dealers will price and trade on a Wednesday or a Thursday. Thursday, Friday's not typical, especially during the summer. But I think you get to a deal of this Size that has captivated the market. It had tremendous institutional interest. So I think it could have, you know, any day of the week would have been fine for us.
- [39:32]
Ed Ludlow
Nelson, one of the things I started the conversation with, with Chairman Che on was the idea that on an ongoing basis, ideas are an interesting mechanism for them in the capital markets. And essentially what Chairman Chase said was, well, we'll look at some stability and give it some time. But yes, how would that work, the idea that you come back to the market on whatever cadence they choose?
- [39:55]
Interjection Speaker
Sure. Well, companies typically will come back to the market. They'll be evaluating where they get the best valuation for those shares, whether it's in their local market or an ADR market. But the typical technology IPO will come back to the market several times to raise capital. This is a very seasoned public company. So they'll go through all those mechanics say where is the best place that you need to raise capital? It could be the debt markets, it could be the equity markets and hopefully it's 80 hours in the US do
- [40:20]
Ed Ludlow
we need to make anything of where they they price the adr? You know, this morning on the Bloomberg it was about this idea. This is a 3% premium over where the common shares in Seoul closed. The ADRs represent a tenth of one sole common share. You know, the backstory is how much money do you or do you not leave on the table?
- [40:42]
Interjection Speaker
That's always the question. Right. Companies and typically if an ipo, let's say it's not an adr, will benchmark off their current public comps. This had a combination. Okay, so what is the equity trading in Korea? Also you have a U.S. large U.S. comp in micron. So how do you find that balance? And that's where I think JP Morgan did a very nice job here getting the price to a point where we've seen some nice upward price action. It's been very, it's very stable at the moment and I think it did just a great job.
- [41:09]
Ed Ludlow
Chairman Che made an interesting point about maybe the rationale or so for doing this, which was not just the capital, the proceeds raised, but introducing SK to the American people.
- [41:21]
Interjection Speaker
Absolutely.
- [41:21]
Ed Ludlow
From that was in the context of the talent perspective, right. A pipeline of talented people that might work for the company from the NASDAQ side and your involvement through the process, how much do you take that into account?
- [41:33]
Interjection Speaker
Quite a bit. And most companies will take that into account. So you look at being on a public stage, the US the global capital markets public is about 150 billion trillion in market cap the US is 70% of that. Think being a public company in the US does show as you want to attract talent. They're making significant investments in the US Having a US currency to do that is a big deal. And even a traditional IPO puts the brand component as a, as one of the. A major reason why they think about tapping the public markets.
- [42:03]
Ed Ludlow
There is another big memory name and chip name in South Korea. It's called Samsung. How much have you been talking to them about doing something similar?
- [42:12]
Interjection Speaker
We never talk about, you know, names on, on camera or in public until it becomes a point where it is public. But I think if you look at having moments where you have a successful offering, it does open up the eyes of others to say does this make sense for us? So at the very least, companies who have an internationalist and will say does how does this correlate to us? Do we have an investor pool to tap into? Do we want to think about the brand aspects and then understanding do they want to do another offering?
- [42:40]
Ed Ludlow
Is there more broadly a pipeline? Do you think of technology companies outside of the United States that, that are looking at this and thinking this is, you know, getting that fair valuation?
- [42:51]
Interjection Speaker
Yeah, yeah.
- [42:52]
Ed Ludlow
So.
- [42:53]
Interjection Speaker
So I was actually just in Europe this week and meeting with a lot of companies and if you look at this year, of the top 10 raises, four have been international. Now three of them, you know, this is one of them with SK Hynix. But you had bending spoons go public. Pepe any very large deals that felt the US capital markets gave them the best valuation. I think we're having more of those conversations than ADR type listings. But both are have a lot of momentum behind them.
- [43:17]
Ed Ludlow
Is there a difference, different speeds in those markets, Asian technology versus European technology that you're seeing?
- [43:23]
Interjection Speaker
No, I wouldn't say that. I think most of the European ones are not are more the startup companies that have not listed anywhere yet. So they really look at the US as a primary first listing. Maybe the only listing we do look at. A lot of companies in Asia might have a local listing and they think about ADRs.
- [43:37]
Ed Ludlow
I got one very quick niche question for you the team sent over which is how is NASDAQ thinking about the prospect of more leveraged single name products? ETFs is something that comes up a lot and has this week leveraged products under. Under in ETF for tech companies in particular.
- [43:54]
Interjection Speaker
Yeah, we look at where the market demand is for things like that. There's market demand and it's a product that we think is going to be appropriate for the market regulated. You know, NASDAQ is a participant to an innovation. We look at how we address market needs.
- [44:06]
Ed Ludlow
Nelson Griggs, NASDAQ President, on an exciting and day here at the nasdaq. David, back to you, Ed.
- [44:12]
David Gura
Appreciate that. Ed Ludlow again there with President Nelson Griggs of the nasdaq. And we have more on the technology fueling the chip frenzy of today. Joining us now is Subramanian Iyer, Distinguished professor of Engineering at ucla, founding director of the center for Heterogeneous Integration and Performance Scaling. Yes, put that together spells chips if you do the first letters of each of those words. He's a former IBM fellow Professor, Great to have you with us. And I want to go back to this interview. And there was a moment during the conversation which the chairman of the SK group talked about the prospect of there being memory as a service. I'm curious sort of how nascent that is, what it means exactly, and how much that represents kind of the future, the prospects of memory going forward.
- [44:50]
Subramanian Iyer
That's fantastic. That's actually a very good lead in to this discussion. So what is why is memory so important today? Right? I mean, it has always been very important. And to a large extent, high performance computing, whether it be classical or high performance computing or artificial intelligence focused computing, has always been memory limited. However, how you use that memory is changing. All right? And if you look at the latest product that comes out of most of the memory companies, including, you know, sk, Hynix, including Samsung, and it is the integration of logic with memory and trying to actually produce more intelligent memory chips. Now how you do this actually depends very much on the architecture of your system and it involves integrating sort of a very high performance logic chip along with the memory. So the memory is no longer just a sort of a dumb piece of a bit, a bunch of bits, but something that is a little bit more intelligent. Okay. And I believe that is what people are looking to do with memory. So go away from the sort of commodity model of memory and say, hey, look, maybe, maybe the way to do this is to configure the memory ourselves and allow the user to use that configuration as they wish.
- [46:22]
David Gura
We have too short a time. But I do want to ask you sort of to situate this company in that pantheon of Samsung, Micron ssk, Hynix, sort of when you look at sort of the work that it's doing and what it's pioneering, where does it stand relative to those other two companies?
- [46:35]
Subramanian Iyer
Actually, currently I would say that Ski, Hynix is in a very, very dominant position. They actually command the largest fraction of the, what is called the HBM market, the high bandwidth memory market, which is really what's fueling all this growth. And they have actually struck some good sort of collaborations or supplier relations with the major sort of logic company tsmc. They have excellent technology and I think all that is coming together very nicely. And you know, this, this, they are, they're very well, well poised to actually benefit from this boom in AI.
- [47:15]
David Gura
A point that they made, the chairman made is that they're very singularly focused on, on memory and maybe that stands to benefit them going forward. I wonder if you agree with that, that they have a very unified sense of what they're doing.
- [47:24]
Subramanian Iyer
Yes, they, they are focused on memory. They're there. They don't have a logic technology. Samsung does have a logic, logic base as well. And they're, they're sort of focused on collaborating or using TSMC technology. That actually is a double edged sword in my opinion. But for the moment it's not a, it's a good strategy. Okay. Whether it is the right strategy long
- [47:50]
Bailey Lipschultz
term, I don't know.
- [47:51]
David Gura
Professor, thank you very much. That's super. Superman and I are joining us from Los Angeles. He's a distinguished professor of engineering at ucla. We'll have him back on. We'll talk about assembly and packaging and interposers as well, all of which are his, his specialties. In the meantime, let's get back to Bloomberg's Anand who is here to talk a bit more about the opening of trade for SK Hynix on the nasdaq.
- [48:10]
Anand Bloomberg Reporter
Hi David. Well, it is up to, it is off to a strong start up about 16% from its offering price of $149. And the strong debut validates what the order book had been signaling. That this deal was more than seven times oversubscribed with total demand, with demand of nearly $200 billion. And SK did not even need to sweeten the deal, pricing its ADRs at a premium to its South Korean shares. And investors are showing that they're willing to pay up for direct US exposure. And I will also say what this means for the broader market that this at least for now quiets concerns of investors pulling back from the trade. Since we have seen quite volatile sessions for the chip sector as of late.
- [48:57]
David Gura
It's an incredible surge from that price of 149. Thank you very much for that update here on this Friday after afternoon. Again as we can pick apart the comments from the chairman of the SK group that took place with Ed Ludlow at the Nasdaq saying this is a dream come true for him and pointing out early on this has been in the works for a very long time. Finally coming to fruition here in New York. We see a trading at 170, a receipt now up 14% from that initial price. And as mentioned just a moment ago, certainly a relief to the Nasdaq, to this company as well, just to see that performance out of the gate. But as we talked about over the course of the last hour, we've been the last Lipschultz Mandeep Singh there's often volatility on the heels of this and we'll continue to monitor that throughout the day here on Bloomberg Television. That does it for this edition of Bloomberg Tech. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, on Spotify and Iheart. This is Bloomberg
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