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The Wall Street Journal (WSJ) has pointed out that the price of SK Hynix’s American Depositary Receipts (ADRs) is trading at a significant premium compared to its underlying shares listed in South Korea, warning that this is "another sign of overheating in AI trading."

James Mackintosh, a senior markets columnist for the newspaper, expressed this concern in a column on the 26th (local time), stating, "The massive premium of the ADRs over the Korea-listed shares is something that shouldn't happen in the market."

According to the WSJ, since trading began on the New York Stock Exchange on the 10th, SK Hynix ADRs have traded at prices 16–51% higher than the underlying Korean shares.

Mackintosh identified the limited supply of SK Hynix ADRs, despite high interest, as one of the primary reasons for the premium.

Mackintosh noted that while U.S.-listed ADRs can be converted into Korean-listed SK Hynix shares, regulatory constraints make the reverse conversion difficult. Because of this, he pointed out that "there is no safe arbitrage between the Korean shares and the U.S. shares."

The implication is that while such a large price gap could not persist if arbitrage—buying the cheaper underlying shares, converting them into ADRs, and selling them at a higher price—were possible, the current regulatory environment makes it practically impossible to execute such trades.

While Mackintosh acknowledged that transaction costs, currency risks, and tax differences could somewhat justify the higher trading price of SK Hynix ADRs, he argued that the current ADR premium far exceeds what these factors can justify.

He noted, "This indicates that demand for semiconductor stock trading is even more out of control in the U.S. than in South Korea, the home of 'FOMO' (fear of missing out) trading, where people treat the market like a game."

In other words, the investment fervor surrounding AI-related stocks has pushed demand for semiconductor stock trading in the U.S. to an uncontrollable state.

He warned, "If the premium narrows as Korean shares catch up, ADR buyers might be fine. But they will take a hit if the company uses its U.S. stock as a piggy bank, and they will take an even bigger hit if semiconductor stocks in both Korea and the U.S. plummet, causing the premium to vanish."

Meanwhile, TSMC, the Taiwanese semiconductor company that previously listed its ADRs on the New York Stock Exchange, also carries a significant ADR premium.

According to the WSJ, the premium on TSMC ADRs was at a stable level of around 3% from 2010 to 2020, but it has soared to an average of 15% since 2022, when ChatGPT was launched.

Regarding the TSMC ADR premium, Mackintosh pointed out, "It shows that Americans have been willing to pay much more for the shares than Taiwanese investors."