Kioxia Holdings has seen its share price weaken, falling more than 20% from the end of June to July 13. The stock, a symbol of the AI rally in Japan, has been pressured by the knock-on effect of declines in the South Korean market, according to Matsui Securities chief market analyst Tomoichiro Kubota, who noted that memory chip stocks are heavily weighted in the Korean index.

Retail investor enthusiasm remains high. Data from the Tokyo Stock Exchange show that margin buying balances are at record levels. On July 13, Kioxia's estimated net buying amounted to approximately ¥870 billion, nearly four times that of SoftBank Group. Sumitomo Mitsui Trust Asset Management senior fund manager Kanesoro Sasai said that economic fundamentals are unchanged and that long-term supply agreements linked to AI investments are expected to provide stable earnings.

However, a stark divergence has emerged in analyst views. Sanford C. Bernstein analyst Mark Li set a target price of ¥40,000 for Kioxia, implying a roughly 40% drop from July 13 levels and citing a further 50% downside from a previous price of over ¥80,000. In contrast, all other broker targets tracked by QUICK exceed ¥100,000.

Mark Li employed a sum-of-the-parts valuation, separating peak profits through 2028 from normalized profits after 2029, and assigned a higher multiple to earnings from long-term supply agreements. His bearish stance on Kioxia is driven mainly by expected earnings per share declines amid unsustainable memory chip prices, with China's Yangtze Memory Technologies Co. (YMTC) posing the key threat.

YMTC, like Kioxia, produces NAND flash memory and has also commercialized similar bonding technology. Counterpoint Research data shows YMTC held a 13% global NAND market share in the first quarter, up 5 percentage points year-on-year. Mark Li predicts YMTC will surpass Kioxia to become the third-largest player by 2028.

Should YMTC ramp up production significantly, NAND market conditions could deteriorate and price erosion risks would rise. Compared with Samsung Electronics and SK Hynix, which also have DRAM businesses, Kioxia faces a higher risk of being drawn into price competition. A Japanese brokerage noted that the recent share price drop has triggered margin calls, leading some investors to sell rather than meet them. There is concern that a further decline in Kioxia could have broader ramifications for the Japanese stock market.