Kioxia stock price has slumped and moved into a bear market this year. It has dropped to ¥50,780, down by over 54% from its highest level this year. This slump may continue in the near term as technical risks emerge.
Why Kioxia Holdings stock has slumped
Kioxia Holdings is a top company in the memory industry, which has benefited from the ongoing artificial intelligence boom. At some point this year, it became the biggest company in Japan.
Recently, however, the company has lost momentum, mirroring the performance of other top companies in the memory industry like Micron, SanDisk, Samsung Electronics, and SK Hynix. DRAM, the popular ETF that tracks the top memory companies, has slumped by over 27% from its highest level this year.
Investors are concerned about the memory industry and its past, which has been characterized by boom and bust cycles. In this, companies in the industry do extremely well as their demand jumps and then their revenue drops when the situation reverses.
Kioxia experienced this weakness in 2023 when its revenue dropped to $9 billion from $11.7 billion a year earlier. Other top companies like Micron and SK Hynix experienced the same weakness.
Bulls note that Kioxia and other memory companies have more room to grow as demand for NAND memory remains resilient. Most notably, Kioxia and other firms have now inked major long-term deals that assures them of demand and prices.
SanDisk has inked deals with eight large companies. At the lower side of the deal, the company estimates that these deals will make it over $90 billion. This is important for Kioxia since it has a long-running relationship with SanDisk.
The two companies jointly develop NAND technology, with nearly all of SanDisk’s flash memory supply coming from its joint venture with Kioxia. Kioxia also owns the manufacturing facilities in Japan. In a recent statement, the two companies committed to investing $31 billion in Japan.
Kioxia revenue growth is continuing
The most recent results showed that Kioxia’s business continued doing well in the second quarter as demand for memory soared. Its revenue jumped by 415% to 1.78 trillion yen, with the profit hitting ¥842 billion, up by over 400% from the same period last year.
Kioxia’s revenue soared because of higher volumes of memory delivered to clients and the higher prices. Most of the demand came from its data center clients. With the data center rollout continuing, its demand will continue to rise.
The management has used this revenue growth to improve its balance sheet, with the total current assets soaring to over ¥2.4 trillion.
Kioxia stock technical analysis
Kioxia stock chart | Source: TradingView
The daily chart shows that the Kioxia share price has remained in a narrow range in the past few weeks. As a result, it has remained below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears remain in control.
The stock has formed a bearish pennant pattern, which normally leads to a strong bearish breakout. If this happens, the next level to watch will be at ¥35,970, its lowest level in July this year. This view will be confirmed if it drops below the lower side of the triangle.
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