Japan does not have many clean AI plays, so investors are piling into Kioxia’s memory chips, which suddenly look like the best ticket in town.
The Japanese memory maker’s shares are up by nearly half so far this year, which tells you how desperate the local market is. Kioxia has been churning out essentially the same memory chips for decades, but the crowd buying them is changing fast.
Memory storage is increasingly being snapped up for data centres, dragging the market away from price-sensitive consumer gadgets and towards fatter-margin infrastructure spending. That shift matters because it changes who sets the tone, and who gets to haggle.
Until recently, the NAND flash memory Kioxia made was brutally commoditised. It mostly lived in smartphones and other consumer kit, and buyers treated suppliers as interchangeable.
In 2024, prices fell by around 50 per cent to record lows, even as the sector moaned about shortages of high-end AI chips. In other words, the fancy accelerators were scarce, while storage got treated like bargain-bin parts.
Now, a new class of customers is emerging with less interest in penny-pinching. Training and running large AI models need huge volumes of storage inside data centres, and that demand is landing on top of years of thin investment and tight NAND supply.
That combination is giving chipmakers like Kioxia more pricing power than they have seen in ages. It explains why the latest pop in the share price looks less like a blip and more like the next leg of a long run.
Kioxia’s stock has gained around 800 per cent in the past 12 months, yet it still trades at about 12 times forward earnings. That is miles below the valuations investors have been slapping on global AI infrastructure names, which tells you the market still sees this as a second-derivative trade.
That caution is fair because Kioxia is an indirect winner from the AI frenzy, not the star of the show. It is wide open to the risk that today’s memory shortage unwinds, which is what memory markets love doing.
A slowdown in big data centre spending or a shift towards alternative storage tech would pressure prices and squeeze margins, even if AI storage demand keeps growing. For now, Kioxia stands out mostly because Japan offers few other ways to play the trend.
As infrastructure spending moves past the first build-out phase, investors will become pickier about where the real choke points lie. The money will drift towards advanced chipmaking gear, precision components, advanced packaging and speciality chemicals, the awkward bits you cannot just crank out in a hurry.
