As SK Hynix gears up for its Nasdaq debut through American depositary receipts on Friday, Jim Cramer said the AI memory-chip leader offers compelling long-term potential but cautioned investors to keep their initial exposure limited.
AI Memory Demand Makes SK Hynix An Attractive Bet
On Mad Money, Cramer said the artificial intelligence (AI) boom has transformed the memory-chip market, making SK Hynix one of the biggest beneficiaries as demand for high-bandwidth memory used in AI accelerators continues to surge, CNBC reported on Thursday.
“We know the memory chip business is on fire and if you’re willing to accept the volatility, I think you could do a lot worse than this one,” Cramer said.
Despite the company’s massive rally since the launch of OpenAI’s ChatGPT in late 2022, Cramer argued the stock still appears attractively valued.
“Their memory chips may sell at a huge premium, but the stock trades at a discount,” he said, noting that the shares trade at just over seven times this year’s expected earnings.
Cramer Warns Memory Chips Remain A Cyclical Business
While bullish on AI-driven demand, Cramer warned investors not to ignore the industry’s long history of boom-and-bust cycles.
According to Cramer, memory-chip makers typically enjoy periods of soaring demand and profits before increased production eventually catches up, leading to falling prices and weaker earnings.
“The big concern is that, historically, memory chips have been a boom and bust business, so when supply eventually catches up with demand, you don’t want to be left holding the bag,” he said.
Shares of SK Hynix have declined roughly 25% from their June 25 peak, alongside broader weakness across memory-chip stocks despite solid earnings from major industry players.
For investors interested in the stock, Cramer recommended taking a measured approach rather than making a large bet upfront.
“If you really want it, though, put on a small position and leave room to buy more into weakness,” he said, adding that history shows every memory-chip boom has eventually been followed by a downturn, even as AI could reshape the industry’s long-term outlook.
Price Action: At the time of writing, SK Hynix shares were up 2.47% at 2,240,000 won ($1,483.84) in Seoul, according to Benzinga Pro.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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