Key facts
- Kioxia Holdings shares fell 16% on Friday, reaching their daily trading limit.
- The selloff is driven by concerns over the longevity of the AI-led rally and investors unwinding leverage.
- Kioxia's market capitalization has halved in the past month, falling 52% from its peak.
- The company's stock had previously surged over 600% year-to-date.
- Other major memory chip producers, including Samsung Electronics and SK Hynix, also experienced significant declines.
Japanese memory chipmaker Kioxia Holdings saw its shares plummet 16% on Friday, hitting the daily trading limit as investors shed leverage against technology stocks amid growing concerns about the sustainability of the artificial intelligence-driven rally. The sharp decline has halved Kioxia's market capitalization in just one month, erasing 52% of its value from its recent peak.
Kioxia's stock had previously experienced a remarkable surge of over 600% since the start of the year, driven by intense demand for memory and data storage solutions fueled by the AI boom. This rally had propelled it to become Japan's most valuable company, surpassing auto giant Toyota in mid-June. However, the recent selloff has seen its ranking drop significantly.
Analysts suggest that the chip sector is inherently vulnerable to cyclical downturns, a pattern observed many times before. Concerns are mounting that global memory prices may stabilize as Chinese memory chipmakers gain traction. Investors are scrutinizing the valuations of chipmakers, questioning whether massive AI spending can justify current stock prices. A gauge of U.S. chip giants fell over 4% on Thursday, with Taiwan Semiconductor Manufacturing Co.'s AI investments facing scrutiny.
Traders have become more critical of AI-related stocks, rotating into sectors that have lagged. Despite this, analysts maintain a bullish outlook on Kioxia, forecasting an 118% return over the next year, and the upcoming Topix index reshuffle is expected to attract significant passive investment inflows. However, the stock faces downside risks from Japanese retail investors' leveraged positions.
The selloff was reportedly triggered by a report indicating that OpenAI might delay its initial public offering until 2027, a development that has impacted stocks across the AI ecosystem. Commentary from Fed Chair Warsh regarding market valuations also contributed to investor unease. Other major memory chip producers, including Samsung Electronics and SK Hynix, saw their shares fall more than 6%, while SanDisk dropped over 10%.
Kioxia, carved out of Toshiba's memory division, has positioned itself as a critical supplier for AI infrastructure, with its production capacity largely sold out. The company's stock had previously surged between 540% and 700% over the preceding year. Kioxia has also been preparing for a U.S. depositary share listing planned for spring 2027, which will be a key event to monitor.