Jim Cramer weighs in on SK Hynix's $26.5bn Nasdaq debut

CNBC host Jim Cramer has said SK Hynix's upcoming Nasdaq debut offers investors another way to benefit from the artificial intelligence boom, but warned that the South Korean chipmaker's long-term prospects still depend on whether the memory industry can avoid its historic boom-and-bust cycles.

The company is set to begin trading on the Nasdaq on Friday through American depositary receipts (ADRs), giving US investors easier access to one of the world's largest producers of high-bandwidth memory (HBM) chips.

Cramer sees value in SK Hynix shares

Despite SK Hynix's huge share price gains since the launch of ChatGPT in late 2022, Cramer said the stock still appears attractively valued.

"Their memory chips may sell at a huge premium, but the stock trades at a discount," he said on CNBC's Mad Money.

SK Hynix shares have climbed roughly 2,550% since November 2022, lifting the company's market value above $1 trillion. However, Cramer noted the stock trades at just over seven times this year's expected earnings.

He advised investors interested in the company to proceed cautiously.

"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.

"If you really want it, though, put on a small position and leave room to buy more into weakness."

AI demand fuels growth but risks remain

Cramer said the investment case for SK Hynix rests on continued strong demand for memory chips used in artificial intelligence systems.

However, he cautioned that the memory semiconductor industry has historically experienced sharp cycles of rapid growth followed by steep downturns once supply catches up with demand.

"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.

Nasdaq debut expands US investor access

SK Hynix's Nasdaq listing, expected to raise around $26.5 billion, ranks among the largest offerings in recent months and will allow US investors to buy shares more easily through ADRs.

The listing comes after the stock retreated about 25% from its June 25 peak, reflecting a broader pullback across memory chip companies, including Samsung Electronics and Micron Technology, despite strong earnings.

Cramer said the recent decline means investors are no longer buying the stock at its highest levels but warned that volatility is likely to continue.

"Fortunately, that means you're not coming in at the tippy-top for this stock. But this thing's a rollercoaster that can go down fast," he said.

According to Cramer, the key question for investors is whether AI has fundamentally changed the memory chip industry enough to prevent another traditional downturn.

"Again, historically, every memory chip boom has led to a memory chip bust," he said.