The chipmaker's shares plunged nearly 10% on Wednesday before trimming some losses in post-market trading. The shares hit record highs in June but have since declined, partly on investor concern over the durability of AI spending by U.S. technology companies.
Nvidia (NVDA.O) suppliers SK Hynix and Samsung Electronics (005930.KS) have faced growing pressure from investors to return a bigger share of excess cash through dividends or share buybacks after record profits fuelled by booming demand for AI memory chips.
SK Hynix said it would buy back and cancel as many as 24 million treasury shares between August 20 and November 19.
"A commitment to its own shares on this scale over the next three months indicates SK Hynix does not think memory pricing is about to roll over," said Josh Gilbert, analyst at trading platform eToro.
The South Korean chipmaker also said it would pursue an expansion of its total shareholder return target through share repurchases, cancellations and dividends, with additional shareholder returns due to be announced alongside third-quarter results.
Its previous plan for 2025 to the end of 2027 was to use up to 50% of cumulative free cash flow for shareholder returns.
The 40 trillion won buyback should satisfy investor expectations, particularly as more buybacks and special dividends could be announced at a later stage, said Sanjeev Rana at investment company CLSA.
Samsung has told Reuters it aims to share details of its shareholder returns policy for this year and beyond "very soon". U.S. rival Micron (MU.O), meanwhile, has pledged to return 100% of its excess cash to shareholders.
BALANCING ACT
SK Hynix said its net cash stood at about 69 trillion won at the end of the second quarter.
The world's leading maker of high-bandwidth memory used in Nvidia's AI chipsets seeks to balance shareholder returns with heavy investment and employee bonuses.
The company has embarked on one of the most aggressive expansion programmes to meet surging AI-related memory demand, pledging hundreds of billions of dollars of investment on chip factories in South Korea.
Last year, it agreed to share 10% of annual operating profit with workers under an agreement that would be in place for 10 years. The company and its South Korean labour union are also finalising the wording of a preliminary wage deal, a source close to the matter told Reuters on Wednesday, adding that a portion of bonuses would be paid in shares.
