Tech stock slump makes AI companies pull back stock market debuts

Several tech companies are putting their stock market debuts on hold after a rough week for tech shares. On Friday, South Korean chipmaker SK Hynix said it was dropping its review of a US listing for Solidigm, its data storage unit. It blamed market swings and a broader slide in chip stocks.

What happened

The trouble started Thursday on Wall Street. The Nasdaq Composite, an index heavy with tech companies, fell 3%. The Philadelphia Semiconductor Index, which tracks chip makers, plunged 7%. Investors are asking whether the huge sums poured into artificial intelligence will pay off.

Chris Weston of research firm Pepperstone said the selling was no longer limited to risky AI companies. Investors were also cutting back on firms with stronger finances and established earnings.

Who is pulling back

An IPO, or initial public offering, is when a company sells shares to the public for the first time, usually to raise money. Several firms have now stepped back from that plan:

• SK Hynix dropped its review of a US IPO for Solidigm, which makes solid-state drives and NAND flash memory.
• Firmus, an Nvidia-backed Australian data center operator, withdrew a planned $5 billion IPO after weak investor demand.
• Oura, the smart-ring maker, postponed its US IPO in September, citing market uncertainty.

Solidigm had considered going public to help pay for a proposed US chipmaking plant. The idea also faced opposition from South Korean regulators over shareholder protection. SK Hynix said the decision does not change Solidigm's growth prospects or investment needs, and that it will look at other ways to raise money. Firmus said it would raise money privately instead.

A bumpy ride for new listings

Companies that did list have felt the swings. South Korean AI cloud operator Elice fell 32% in its Kosdaq debut on Tuesday, even though demand was roughly 400 times the shares on offer. The next day it rebounded 30%.

The slowdown shows in the numbers too. RBC Capital Markets reported that the dollar volume of global IPO filings fell 33% in September from a year earlier.

Why it matters

If you own tech stocks, or funds that hold them, expect prices to stay choppy. Fewer new listings also means fewer chances to buy into a young company early. Some of these firms are turning to private funding, which ordinary investors generally cannot join.

What happens next

Weston said high trading volumes across the AI sector suggest the selling could continue. In a falling market, he wrote, sellers do not need a fresh reason to keep selling. It is not clear when Solidigm, Firmus or Oura might try again.