Japanese memory-chip manufacturer Kioxia Holdings Corp. saw its market worth cut in half within a month of reaching the top spot as Japan's biggest company by market cap, amid fears that the AI boom had pushed stock prices too high.
On Friday, Kioxia shares fell as much as 16% in Tokyo morning trade, erasing 52% from last month's peak and eliminating at least ¥30 trillion ($185 billion) from its valuation. In mid-June, Kioxia surpassed Toyota Motor Corp. in market capitalization after its stock surged more than 600% from the beginning of the year, fueled by excitement over AI-driven demand for memory and data storage. Since then, its ranking has slipped to fourth among Japanese companies.
Yugo Tsuboi, who serves as chief strategist at Daiwa Securities, remarked, "The chip sector is vulnerable to the silicon cycle, and we've seen this pattern many times before." He added that Chinese memory chipmakers are drawing increased scrutiny, and some observers suspect the worldwide increase in memory prices could begin to stabilize. "It's become harder to keep pricing in further acceleration in earnings growth, and fast-money investors may have rushed to take profits for now."
Memory-chip markets are notoriously cyclical, with booms and busts driven by supply-demand imbalances. Kioxia's recent plunge mirrors previous downturns in the sector, where rapid price gains often lead to oversupply and subsequent corrections. The company's reliance on AI demand makes it particularly sensitive to shifts in technology spending.
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Kioxia's journey has been marked by extreme volatility. Before its meteoric rise, the company endured a prolonged downturn in the memory-chip market, one of the worst in the sector's history. Its recent rally was fueled by insatiable demand for AI-related memory, but the swift reversal shows how quickly sentiment can change.
The exit of Bain Capital, a key shareholder, has raised eyebrows, and the high level of leveraged bets by Japanese retail investors adds to the fragility. As the global chip cycle shows signs of peaking, Kioxia's future remains uncertain.
Market participants are examining semiconductor companies with greater scrutiny, wondering if the returns from large AI investments can support high stock prices. A benchmark of major chip stocks fell over 4% in the US on Thursday, as worries about TSMC's AI spending outweighed its positive outlook.
In recent months, traders have grown more skeptical about AI, shifting their money away from AI-related stocks and into underperforming sectors.
Wall Street analysts still have a positive view on Kioxia, predicting an approximately 118% gain over the coming year. Additionally, the Topix index rebalancing in October is anticipated to attract significant passive fund flows.
However, Kioxia faces additional downside risk from Japanese individual investors who hold leveraged stakes, which could worsen if selling picks up.
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