Kioxia Holdings stock has sold off sharply in the last few months as investors have sold off companies in the memory industry. It dropped to ¥13,500 on Monday, down by over 52% from its highest point this year, erasing billions of yen in value. This retreat may continue as jitters in the memory and AI industry accelerate.
Kioxia Holdings stock has dropped despite strong growth
Kioxia Holdings, a top SanDisk partner, is having the best year ever as its revenue and profitable growth accelerates amid the ongoing AI boom. Its products have seemn robust growth, a trend the management believes will continue in the foreseeable future.
The most recent results showed that revenue jumped by 415% YoY in the June quarter to ¥1.76 trillion. It had made ¥342 billion a year earlier. Notably, its net profit soared to ¥842 trillion, while its operating margin jumped to 75%.
This growth happened across its business, with SSD & storage and smart devices soaring by over 574% and 188%, respectively. The management expects that to grow, citing strong demand from its top clients. As a result, together with SanDisk, the company plans to invest $31 billion in Japan to boost its capacity in the coming years.
The next key catalyst for the stock will be the upcoming earnings report on October 30th. These results will provide more insights about its revenue and profitability growth.
Kioxia is caught in the AI bubble fears
The ongoing Kioxia stock retreat is mostly because of the fears of the AI bubble, which analysts believe will burst soon. Indeed, the AI Stock Bubble Index has jumped to the extreme zone of 74, and this trend may continue soon.
These fears explain why many companies in the memory industry have slumped. DRAM, the popular memory ETF, has dropped by 43% from its highest point this year, with most of its constituent companies, including Micron, SK Hynix, and Samsung falling by double digits from the all-time high.
Ray Dalio has warned that the AI bubble may burst soon since interest rates and bond yields have jumped this year. The ten-year yield jumped to a multi-year high of 5.3%, while the two-year rose to over 5%.
In a report released last week, Gartner warned that many AI companies will need to announce large impairments in the coming years.
Kioxia Holdings stock technical analysis
The daily chart shows that Kioxia shares have slumped in the past few months, moving from ¥37,580 in June to ¥13,455 today. It formed a bearish pennant pattern, which is made up of a vertical line and a symmetrical triangle. It has already moved below its lower side, confirming the bearish outlook.
The stock has slumped below the 50-day moving average and the Supertrend indicator. At the same time, the Relative Strength Index (RSI) and the MACD indicators have continued falling this month.
Despite its strong fundamentals, the stock will likely continue falling, potentially to ¥10,000. This view will be confirmed if it drops below the key support level of ¥11,990.