Samsung Elec. and Hynix's year-end net cash 375 trillion won... Twice that of Nvidia

"Samsung Elec. and Hynix's year-end net cash 375 trillion won... Twice that of Nvidia"

Reuters: "Shareholders demand increased shareholder returns"

The combined year-end net cash (cash and cash equivalents minus borrowings) of Samsung Electronics and SK hynix is expected to exceed twice that of Nvidia.

Reuters reported that an analysis of consensus (average market forecast) compiled by financial information provider LSEG predicts Samsung Electronics' and SK hynix's year-end net cash to be $164.1 billion (approx. 234 trillion won) and $99.3 billion (approx. 141 trillion won), respectively.

The combined amount for both companies is $263.4 billion (approx. 375 trillion won). This is more than twice Nvidia's $101.7 billion (approx. 145 trillion won), the leading stock in AI semiconductors.

It also surpasses the combined estimated net cash of the six Magnificent 7 (M7) companies excluding Nvidia. Among the six companies, only Tesla ($10.6 billion) and Microsoft ($5.4 billion) are expected to show net cash. In contrast, the market expects Apple (-$35.2 billion), Meta (-$80.2 billion), Alphabet (-$8.2 billion), and Amazon (-$4.0 billion) to show negative net cash, or net debt, due to increased investment in AI infrastructure.

Memory competitor Micron's year-end net cash is expected to be $40.1 billion (approx. 57.2 trillion won).

Samsung Electronics and SK hynix aim to return half of their free cash flow (FCF), which is cash from operating activities minus capital expenditures (CapEx), to shareholders.

In comparison, Micron pledged 100% returns in June.

SK hynix stated in its earnings call last week that it is reviewing measures to expand shareholder returns and will share its plans within this year.

Richard Clode, a portfolio manager at Janus Henderson Investors, an asset management firm and SK hynix shareholder, urged the company to increase the ratio to at least 80%, stating, "Sticking to around 50% of free cash flow will lead to an inefficient balance sheet," and "I think SK hynix understands the urgency and disruption in the market today."

J.P. Morgan lowered SK hynix's target price on the 5th, saying, "A clear stance on capital allocation is essential to restore stock market sentiment."

Adil Ibrahim, head of equities at Clay Group, said, "Given their expected cash generation capabilities, both companies can afford investments while also providing significantly greater shareholder returns," adding that it's not an "either-or" problem between investment and shareholder returns.

Earlier, Reuters reported that Samsung Electronics stated in a statement sent to them that it "continues to focus on maintaining a sound financial structure while also exploring ways to expand shareholder returns in a sustainable manner."

SK hynix also stated in a separate statement that it "believes it can significantly expand shareholder returns" and is "reviewing various options for additional shareholder returns."