The recent decline in a prominent semiconductor stock underscores the increasing demands placed by investors in the AI sector.
Shares of Kioxia, a Japanese memory-chip manufacturer, dropped by as much as 17% on Monday following a less-than-encouraging earnings forecast, even amid persistent strong demand for chips integral to artificial intelligence systems.
Kioxia had been one of the standout performers in the stock market during the AI infrastructure surge, with its stock skyrocketing over 750% in the year's first half, spurred on by optimistic projections regarding the need for data-center storage solutions.
Although the company's results for the September quarter largely met expectations, its revenue and operating profit forecasts for the December quarter fell short of analyst consensus. Analysts at Bernstein, led by Mark Li, described the guidance for nearly stagnant quarterly revenue and profit as a "massive miss" in a note dated October 30.
Kioxia attributed some of the weakened outlook to delays in the shipment of data-center storage products, which has resulted in some anticipated sales being pushed into the next quarter. The company also noted that a larger proportion of lower-priced products for smartphones and personal computers would likely hinder growth in average selling prices.
Nevertheless, Kioxia projects a tight memory supply situation will persist into 2027, with all planned capacity for that year already accounted for. The firm has secured long-term agreements covering more than half of its anticipated shipments in 2028.
This selloff impacted Japanese stocks, leading to a decline in the benchmark Nikkei 225, which fell by as much as 1% on Monday before staging a recovery later in the day.
The downturn followed a challenging week for U.S. technology stocks, as investors began to closely examine the hefty costs associated with AI development and the pace at which companies might translate this expenditure into profits.
This market reaction occurred despite a general upswing in the memory chip sector, as demonstrated by record quarterly profits recently reported by South Korea's Samsung Electronics and SK Hynix.
In contrast, SK Hynix provided a clearer view on future demand, revealing long-term customer agreements that cover more than half of its production capacity for 2027 and 2028, leading to a rise in its stock price post-earnings report.
