Evaporating nearly 40 trillion yen and with its market value down to one-third: Kioxia falls from Japan's number one, AI storage narrative faces double backlash

Japanese NAND Flash giant Kioxia is undergoing a dramatic valuation restructuring. Once the chip company that surpassed Toyota to become Japan’s most valuable listed firm just a month ago, its market cap has since dropped from a historic peak of 60 trillion yen ($380 billion) down by nearly 40 trillion yen ($253 billion), shrinking to about one-third of its former high. The fading AI storage hype, combined with the rise of Chinese NAND manufacturers, is exerting a dual pressure on the company.

Kioxia’s share price plunged by as much as 16% during trading last Friday, accumulating a decline of more than 52% from last month’s highs, with over 30 trillion yen (approximately $185 billion) in market value erased. The company’s ranking by market cap has fallen from Japan’s number one to fourth place. This plunge occurred as the global chip sector is broadly under pressure—on Thursday, the US chip stock index dropped more than 4% in a single day, and doubts are mounting over whether AI’s massive capital expenditures can deliver corresponding returns.

Kioxia’s sharp correction reflects a systemic repricing of AI storage premiums. Daiwa Securities’ chief strategist Yugo Tsuboi noted that Chinese memory chipmakers are receiving increasing attention, and the market is starting to worry that the global uptrend in memory pricing may level off. He also pointed out, “It’s becoming increasingly difficult to continue pricing in further acceleration in earnings growth, and funds chasing short-term returns may be eager to take profits.” Kioxia will release its financials at the end of October; whether earnings expectations can support current valuations will be a key test.

From Over 600% Year-to-Date Surge to Halving: The Extremes of AI-Driven Price Moves

Kioxia’s recent volatility is a microcosm of the AI investment craze and the subsequent reality check.

Since its public listing in 2024, Kioxia’s stock price soared alongside the explosive demand for AI storage. At its peak this year, the stock was up more than 600%, and by mid-June, its market cap had overtaken automotive giant Toyota, making it the most valuable listed firm in Japan and one of the best-performing stocks in the MSCI Global Index for the period. At that time, the market had immense expectations for the demand for storage chips fueled by AI infrastructure development, and as one of the world’s main NAND Flash suppliers, Kioxia was viewed as a core beneficiary of this trend.

However, this narrative met a sudden halt in just a month. From becoming Japan’s most valuable company to losing half its value, Kioxia achieved this reversal in about a month. Investors started to reassess the valuations of global chip makers, questioning whether AI’s massive investments could actually yield matching commercial returns. Even though TSMC’s AI investment prospects remain fundamentally solid, that wasn’t enough to prevent a change in market sentiment, further intensifying selling pressure across the sector.

Chinese NAND Manufacturers Increase Production: Storage Cycle Turning Point May Arrive Early

Another core driver behind Kioxia’s downturn comes from the supply side: Chinese NAND manufacturers are accelerating capacity expansion and using price competition to reshape the market landscape.

According to Daiwa Securities’ Yugo Tsuboi, the rise of Chinese memory manufacturers has prompted the market to reassess the upside for global memory pricing. In the earlier AI rally, the general market expectation was that memory prices would continue to climb, and Kioxia’s profit growth forecasts were based on this premise. If low-cost production capacity from Chinese manufacturers enters the market at scale, this assumption could be undermined.

Kioxia’s business is highly concentrated in NAND Flash, making it far more sensitive to the cyclical swings in storage prices than peers with more diversified product lines. Yugo Tsuboi also warned, “The chip industry is inherently susceptible to Si cycle shocks; we’ve seen this pattern many times before.” The market is concerned that, given the dual factors of AI-driven demand and expanded Chinese capacity, this storage upcycle’s turning point could arrive sooner than previously expected.

Shareholder Exit and Leveraged Positions: Downside Risks Unresolved

Beyond fundamentals, Kioxia also faces potential risks from its capital structure.

Bain Capital’s exit as a shareholder has been interpreted by some investors as a signal that the semiconductor cycle and Kioxia’s stock rally may be nearing their peak. As a key institutional shareholder, Bain Capital’s reduced holding exacerbated sell-offs at a time when market sentiment was already fragile.

Meanwhile, Japanese retail investors hold a large number of leveraged positions in Kioxia. Should selling accelerate, forced liquidations could create a negative spiral, further increasing the stock’s downside risk.

Nevertheless, analysts remain generally optimistic about Kioxia. According to aggregated analyst forecasts by Bloomberg, Kioxia’s expected return over the next year is about 118%. In addition, the Topix index will undergo a constituent adjustment in October, which is anticipated to bring substantial passive capital inflows to Kioxia, providing some degree of support.

Peer Comparison: Widespread Revaluation of AI Storage Premiums

Kioxia’s experience is not unique but represents a broader revaluation in the global memory and chip sector.

Memory competitors like Micron and Samsung are also facing a market-wide reappraisal of AI storage premiums. Investors have continued to rotate out of AI-related stocks over recent months in favor of previously lagging sectors; this wave of rotation proved particularly dramatic for Kioxia—precisely because its earlier rally was so aggressive, its correction was equally severe.

Kioxia’s financial report at the end of October will be a pivotal market test. Whether the company can address doubts about sustained AI storage demand with actual profit data, and management’s strategies to respond to Chinese competitors’ capacity expansion, will directly determine whether this round of valuation restructuring is a temporary adjustment or a structural turning point.