SK Hynix share price plummets after double downgrade by Morgan Stanley

(Bloomberg) — SK Hynix Inc. shares plunged, dragging down other peers, after Morgan Stanley cut its rating on the Korean memory chip maker by two notches, citing its waning pricing power.

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The stock fell as much as 11 percent to its lowest level since Feb. 8. Among other semiconductor stocks listed in Seoul, Hanmi Semiconductor Co. fell as much as 8.2 percent and Samsung Electronics Co. fell 3.4 percent.

Morgan Stanley downgraded SK Hynix to underweight from overweight and lowered its price target to 120,000 won from 260,000 won. The brokerage said the stock is now the least preferred among global memory makers.

“We prefer to shift to quality in Samsung and value-oriented end markets,” analysts Shawn Kim and Duan Liu wrote in a note. “Storage conditions are starting to deteriorate. From here, it will become more challenging for revenue growth and margins as we move beyond late-cycle conditions.”

SK Hynix shares rose to a 24-year high earlier this year amid excitement over its supply deal with artificial intelligence leader Nvidia Corp. Despite the decline in recent months, it is still up more than 2% year-on-year, while Samsung is down 21%.

Korean stocks have been hit particularly hard by the global sell-off in the technology sector on concerns about the realization of AI gains. Thursday's decline came after a three-day Korean holiday during which U.S. rivals extended losses and analysts warned of weak demand for Apple Inc.'s iPhone 16.

In the wake of the recent hype surrounding artificial intelligence, the market has underestimated the impact of excess inventory and “over-shipments” on demand for memory chips, according to Morgan Stanley, although expectations for AI and enterprise server products remain high.

“Pricing conditions are showing the first signs of deterioration in two years, with contract prices well below what manufacturers are offering,” the analysts wrote. “Put simply, 'business is not so good,' say some leading memory sellers.”

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