Kioxia stock price continued its strong downward trend today, November 2, as concerns about the artificial intelligence (AI) industry accelerated. It also plunged after its earnings report showed demand for its memory solutions was starting to level off. It has dropped by nearly 70% from the year-to-date high.
Kioxia Holdings issued a soft outlook
Kioxia share price plunged as investors reacted to its latest earnings and guidance. The company, which is a top partner to SanDisk, said that its operating profit for the December quarter will be about ¥2 trillion ($12.7 billion), short of the expected ¥2.35 trillion.
This guidance suggests that its business is levelling off, considering that its operating profit in the September quarter stood at ¥1,99 trillion.
Kioxia was quick to note that the slowdown was not because of a lack of demand. Instead, the management said that it was because of the timing of shipments, rather than a deterioration in demand. It said that some of the orders that were scheduled for the current quarter were brought forward into the September period. Other orders have been pushed into the March quarter because of the longer production lead times.
The management expects that the growth will return in the March quarter, with the management noting that it was already sold out for next year. Also, some large clients have started their negotiations covering 2029 and beyond.
In its earnings report last week, the company said that its revenue soared by 436.8% in the six months to September, reaching ¥4.24 trillion. Its operating profit soared to ¥3.3 trillion.
Concerns about the AI industry remains
Kioxia Holdings’ guidance was still strong, especially for a company that was on the verge of collapsing a few years ago.
Still, its stock has dropped because of the ongoing fears about the AI industry. Indeed, other top companies like Micron, SanDisk, Samsung Electronics, and SK Hynix have all plunged by double digits despite their strong growth. The Roundhill Memory ETF (DRAM) has slumped by over 20% from its peak.
Investors are worried that demand for these memory products will start falling as companies face funding challenges. A good example of this is OpenAI, which raised just $11 billion in funding, well short of its $30 billion guidance.
Elon Musk has warned that AI data center companies are facing a funding risk that could derail the industry. Such a move would affect Kioxia and other companies in the memory space.
READ MORE: Is the AI bubble bursting? In China, it has already burst
Kioxia stock technical analysis
Kioxia chart | Source: TradingView
The daily chart shows that Kioxia shares have been in a strong sell-off in the past few months. It tumbled from a high of ¥37,580 earlier this year to the current ¥11,505.
The stock has already dropped below the lower side of the bearish pennant pattern, which is made up of a vertical line and a symmetrical triangle. The stock is also nearing the formation of a death cross pattern as the spread between the 50-day and 200-day moving averages narrow.
Therefore, the path of least resistance for the shares is bearish, with the next key target to watch being at ¥10,000.
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