Japanese chipmaker Kioxia Holdings faces further downside pressure as margin loan balances swell, raising the risk that investors who bought shares with borrowed money will be forced to sell at a loss. Kioxia, which makes NAND flash memory used in artificial intelligence servers, is one of Japan's largest listed companies by market capitalization. Its influence on the broader market is set to grow after Japan Exchange Group, which operates the Tokyo Stock Exchange, said this month it would raise the stock's weighting in the benchmark Topix index.
Bloomberg reported on the 18th, citing Tokyo Stock Exchange data, that Kioxia's margin buying balance stood at about 920 billion yen (roughly 7.8 trillion won) as of the 15th, the largest among companies listed on the exchange. That leaves some margin traders at risk of being forced to liquidate positions below their purchase prices.
Trading has contracted along with the share price. Trading value on the 16th fell to 766 billion yen (about 6.5 trillion won), down 84% from its peak. Takehiko Masuzawa, head of equity trading at Phillip Capital Japan, said short-term investors who bought the stock because it was rising no longer have a reason to buy. He attributed the drop in trading value to reduced participation by hedge funds and individual day traders.
Tomoichiro Kubota, senior market analyst at Matsui Securities, said the problem is that margin buying has become extremely bloated, and that this could put downward pressure on the share price. He added that if retail investors are forced to dump shares as the maturity of their margin positions approaches, there is a risk the decline will deepen.
AI-related stocks have been under pressure for several months on concerns that capital spending plans at companies in the sector are outpacing the level of growth ahead. Kioxia has been among the hardest hit. The stock is down 63% from the record high it set in June. Shota Sando, an analyst at Tokai Tokyo Intelligence Laboratory, estimated that the margin balance will stay elevated at least through the end of the year, as deadlines arrive around then for investors who bought near the peak.
Still, the earnings outlook remains solid as NAND prices rise. Based on estimates compiled by Bloomberg, Kioxia's net profit for the current fiscal year is expected to reach about 5.6 trillion yen (roughly 47.2 trillion won), about 10 times the level of a year earlier. Its 12-month forward price-to-earnings ratio stood at 3.2 times last Friday, near the lowest level since January 2025. That is below the 6.2 times for U.S. rival SanDisk, leaving the stock cheap by comparison.
