SK Hynix shares fell 3% in Seoul on Friday after the company scrapped plans for a Solidigm IPO. The firm said, "Solidigm will halt its review of potential pre-IPO and IPO options," due to market volatility. They now seek other ways to fund a new U.S. plant for AI memory.

Shares of South Korean chipmaker SK Hynix's were down as much as 3% in Seoul on Friday morning after the company halted a review of a potential U.S. initial public offering for its subsidiary Solidigm.

"Solidigm will halt its review of potential pre-IPO and IPO options," the company said in the statement after assessing recent capital market conditions and share price trends, while also exploring various funding options to finance a new U.S. semiconductor fabrication plant amid growing demand for AI memory.

The chip manufacturer said an IPO could have helped fund Solidigm's expansion while providing greater financial flexibility for shareholder returns, including dividends, share buybacks and share cancellations.

However, financial market volatility had increased and contributed to a broader correction in semiconductor stocks, prompting SK Hynix to reassess whether an IPO would benefit existing shareholders.

The company also said that Solidigm's existing production facilities had limited capacity to meet rising AI-driven memory demand, underscoring the need for additional manufacturing capacity in the U.S.

The decision also follows regulatory scrutiny in South Korea.

The country's financial regulator said Monday that a potential U.S. listing of Solidigm could violate South Korean rules restricting dual listings, according to Reuters.

Financial Supervisory Service Governor Lee Chan-jin said regulators were examining whether the IPO would require a review under the country's rules designed to protect minority shareholders.

SK Hynix said Solidigm's investment needs remain unchanged and that it would continue exploring alternative financing options to support the subsidiary's growth and enhance shareholder value.

The announcement comes as U.S. technology stocks face pressure amid worries over AI spending.The tech-heavy Nasdaq Composite slid 2.6% on Thursday, its worst session since June, while Nvidia fell 4.4% and Advanced Micro Devices dropped 8.1%.

Amid a sell-off in memory stocks, Nvidia CEO Jensen Huang told CNBC Thursday that he does not expect an oversupply of memory chips by 2029, despite concerns over weakening demand.