AI boom just created a company bigger than Berkshire Hathaway
What's the story
SK Hynix, the South Korean semiconductor firm, has crossed a major milestone by hitting a market capitalization of over $1 trillion. The company's shares surged as much as 14.9% on Wednesday, taking its market value to an all-time high of $1.12 trillion. This comes on the back of a global surge in demand for high-bandwidth memory chips used in artificial intelligence (AI) servers and accelerators. The company is now more valuable than Berkshire Hathaway and Walmart, among other big names.
Market influence
Rallies in South Korean stocks
SK Hynix has established itself as a major supplier to AI chip giant NVIDIA, further solidifying its position in the global AI supply chain. The company's stock has skyrocketed about 250% since the start of the year. The rally is not just limited to SK Hynix. Domestic rival Samsung Electronics also crossed the $1 trillion market capitalization mark earlier this month.
Market dominance
AI boom lifts KOSPI index
Samsung and SK Hynix together account for over 40% of South Korea's benchmark Kospi index. This clearly shows how much the performance of this index is linked to global demand for AI-related semiconductors and memory chips. The Kospi index has nearly doubled since the start of the year, according to data from LSEG.
Market risks
Risks of concentration
Analysts have warned that this concentration could increase market volatility and make the benchmark more vulnerable to risks like supply chain disruptions and a slowdown in global data center investment. Peter Kim, global investment strategist at KB Financial Group, said that SK Hynix's valuation has become "cheaper" as analysts have raised earnings forecasts faster than share prices have increased.
Index performance
Record high for KOSPI index
The KOSPI index, led by Samsung and SK Hynix, hit a record high of 8,457.09 on Wednesday. The sharp gains triggered a "sidecar" curb that temporarily halted algorithmic trading. The KOSPI has emerged as the world's best performer in a global AI boom, rising 91% so far this year after a 76% rise last year.