For the third time this month, a chip giant has joined the $1 trillion club

By Stephanie Yang, CNN

(CNN) — South Korean semiconductor giant SK Hynix became one of the few companies in the world with a $1 trillion market cap this week, as a global AI boom continues to propel chip stocks to record levels.

The memory chip maker’s rise follows that of its competitors: Samsung Electronics and Micron, a US semiconductor manufacturer which also hit $1 trillion earlier this week. The three companies combined account for nearly all of the world’s production of memory chips.

Just a few years ago, memory chips were an older, largely overlooked corner of the wider semiconductor industry. Many tech leaders and investors were focused on the development of advanced processing chips like the ones designed by Nvidia and produced by TSMC, companies which are both also worth more than $1 trillion.

But the rush to develop cutting-edge artificial intelligence tools and infrastructure has boosted demand for memory storage as well, leading to a global shortage of the kind of semiconductors that provide it.

Both Samsung and SK Hynix, South Korea’s two largest companies, have reported record profits in the first quarter of the year. But a disparity in bonuses compared with SK Hynix led Samsung workers to protest and threaten to strike for 18 days this month, before a deal was reached between the company and the union.

Rising inequality

The divergence between AI and other parts of the economy in Asia has fueled discontent over widening inequality and who benefits from the AI boom. Workers at SK Hynix could receive as much as $900,000 in bonuses this year, and Samsung employees could receive as much as $400,000 under the new agreement.

The AI boom has led to unprecedented valuations at US corporations too – such as Nvidia, the world’s largest company worth $5 trillion and designer of advanced computer chips, and Anthropic, which said Thursday that it raised $65 billion at a $965 billion valuation.

The rapid rise of tech stocks has also raised concerns about an AI bubble, and the global economy’s susceptibility to a correction if AI fails to deliver on projected profits or its promise to revolutionize the workplace.

RBC analysts said in a research note last week that South Korea’s benchmark index, which has climbed in recent weeks to become the world’s seventh-largest, has become the “poster child of the AI tech rally in Asia.” However, Samsung and SK Hynix represent about half of the index, leaving the rise vulnerable to downturns in tech.

“This degree of concentration… leaves the broader South Korean equity market exposed to sharp swings due to idiosyncratic developments associated with a very small number of companies, potentially leading to market volatility and downside risks,” the report said.

The-CNN-Wire
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