Japanese memory chipmaker Kioxia Holdings’ market capitalization halved in just a month since becoming the nation’s most valuable company, on growing concerns the artificial intelligence-driven rally in the sector has gone too far.
Kioxia shares tumbled as much as 16% in Tokyo’s morning trading on Friday, down 52% from last month’s peak and losing at least ¥30 trillion ($185 billion) in value. In mid-June, Kioxia overtook auto giant Toyota in market cap value after the stock rallied more than 600% from the start of the year, driven by exuberance about demand for memory and data storage amid an AI boom. Its ranking has since dropped to the fourth-largest Japanese company.
“The chip sector is vulnerable to the silicon cycle, and we’ve seen this pattern many times before,” said Yugo Tsuboi, chief strategist at Daiwa Securities.
Chinese memory chipmakers are gaining attention, and people are starting to think that the rise in memory prices globally may start to settle down, he said.
“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.”
Investors are scrutinizing global chipmakers more closely as they question whether the payoff from massive AI spending can justify lofty valuations. A gauge of chip giants slumped more than 4% in the U.S. Thursday, with concerns over Taiwan Semiconductor Manufacturing Co.’s AI investments overshadowing its solid outlook.
Traders have become more critical over AI in recent months, rotating out of stocks linked to the technology and into sectors that have lagged.
Analysts remain bullish on Kioxia, forecasting a return of about 118% over the next year. And the Topix index’s reshuffle in October is expected to bring in large passive inflows.
But Japanese retail investors’ leveraged position in Kioxia exposes the stock to further downside risks if the selling accelerates. The exit of shareholder Bain Capital was seen as a sign by some investors that the semiconductor cycle and the stock’s rally may be nearing a peak.
For years, Kioxia grappled with one of the worst downturns in the memory-chip sector. But since their listing in 2024, Kioxia’s shares have surged on runaway demand for AI memory chips, making it the best-performing stock on the MSCI World Index.