Kioxia shares face headwinds from margin-buying gone wrong

Published Mon, Oct 19, 2026 · 07:38 AM

[TOKYO] Kioxia shares face further downward pressure because of a buildup of positions from investors who borrowed to buy the stock on the assumption it would rise, and now may need to sell at a loss.

Outstanding leveraged long positions in the stock totalled about 920 billion yen (US$5.8 billion) as at Thursday (Oct 15), the largest among all companies listed on the Tokyo Stock Exchange, according to data from the bourse.

Meanwhile, trading activity in Kioxia has declined along with its share price, with turnover dwindling by 84 per cent from its peak to 766 billion yen on Friday, leaving some margin traders at risk of being forced to close out their positions at a lower price than they bought in.

“The problem is that margin buying has become extremely bloated,” said Tomoichiro Kubota, chief market analyst at Matsui Securities.

This is a potential source of downward pressure on the price, and there is risk of a deeper fall if retail investors are forced to dump shares as deadlines on their margin positions approach, he said.

Artificial intelligence-related stocks have been under siege in recent months amid concern that capital spending plans may be outpacing the level of future growth for companies in the sector.

Kioxia has been one of the hardest hit stocks, with its share price down 63 per cent from a record high set in June.

Shota Sando, an analyst at Tokai Tokyo Intelligence Lab, estimated the margin balance to remain elevated at least until around the end of December, when those who bought near the highs come due.

Kioxia, which makes Nand flash memory used in AI servers, is one of Japan’s largest stocks by market capitalisation.

Its influence on the broader market is set to increase after Japan Exchange Group, the operator of the Tokyo Stock Exchange, announced the stock’s weighting on the benchmark Topix index will be increased starting in October.

Short-term investors who had been buying because the stock was rising no longer have the same motivation to purchase the shares, said Takehiko Masuzawa, head of equity trading at Phillipcapital Japan.

Participation by hedge funds and retail day traders has declined, contributing to a drop in trading value, he said.

The company’s earnings outlook, however, remains strong.

With Nand prices rising, Kioxia’s net income for the current fiscal year is expected to reach about 5.6 trillion yen, according to forecasts compiled by Bloomberg, roughly 10 times 2025.

Its 12-month forward price-to-earnings ratio stood at 3.2 times on Friday, near its lowest level since January 2025.

That is also below the 6.2 times for US peer SanDisk, leaving the stock looking cheap.

There are also expectations that the increase in Kioxia’s Topix weighting could generate 2 trillion yen of passive inflows.

Still, there are few drivers that would suggest that trading might return to its previous level of intensity.

A decline in volatility has further reduced the stock’s appeal to short-term investors.

Even the stock’s three-for-one split in October, which would normally have been expected to boost liquidity, has had little noticeable impact on trading volumes. BLOOMBERG