Kioxia surge redraws Japan’s market order

Kioxia Holdings has moved within striking distance of Toyota Motor’s market value, underscoring how the artificial intelligence boom is reshaping Japan’s corporate hierarchy and lifting a memory-chip maker that listed in Tokyo less than two years ago into the country’s market elite.

The Tokyo-based maker of NAND flash memory and solid-state drives has become one of the most closely watched stocks on the Tokyo Stock Exchange after a sharp rally tied to demand for data-centre storage, AI servers and high-performance memory systems. Its market capitalisation has climbed into the tens of trillions of yen, placing it near Toyota and behind SoftBank Group in a reshuffled ranking that would have seemed unlikely when Kioxia priced its initial public offering at 1,455 yen a share in December 2024.

The shift marks a wider challenge to the long-standing dominance of Japan’s manufacturing champions. Toyota, the global carmaker that symbolised the strength of Japan Inc. for decades, has been displaced from the top position by SoftBank during the latest AI-led surge, while Kioxia has risen rapidly from a former Toshiba memory unit backed by Bain Capital into a central player in the market’s technology rotation.

Kioxia’s climb reflects investor expectations that memory will remain a bottleneck in AI infrastructure. Generative AI systems require vast amounts of storage and high-speed data movement, pushing demand beyond the older cycle driven mainly by smartphones and personal computers. Data-centre operators, cloud companies and chip designers are competing for components needed to train and run large AI models, giving memory producers stronger pricing power after years of volatility.

The company’s earnings have strengthened sharply. Kioxia has projected operating profit of about 1.3 trillion yen for the April-June quarter, a figure that puts it among the most profitable listed companies in Japan. Its latest annual results showed strong momentum in revenue, margins and cash generation, helping ease earlier concerns about debt and cyclicality. Rating upgrades to investment grade have added to the perception that the balance sheet is improving at a time when investors are rewarding semiconductor exposure.

Kioxia’s origins give its rise broader industrial significance. The company traces its roots to Toshiba’s memory business, which was sold to a Bain-led consortium in 2018 after Toshiba’s financial crisis. The group was renamed Kioxia in 2019, drawing on the Japanese word for memory and the Greek word for value. Its public listing in 2024 valued it below 800 billion yen, after earlier IPO attempts were delayed by weak valuation conditions and pressure in the memory market.

That cautious debut contrasts sharply with its current status. Shares have multiplied as investors reassessed the role of NAND flash in AI systems, especially as large-scale data centres require higher storage density, faster access and more energy-efficient hardware. Kioxia has also been developing advanced BiCS FLASH technology and promoting next-generation SSDs for AI storage infrastructure.

The rally has also lifted questions over valuation risk. Memory chips remain one of the semiconductor industry’s most cyclical segments, with prices exposed to shifts in capital spending, inventory levels and customer demand. A sharp rise in market value leaves Kioxia vulnerable if hyperscaler investment slows, if competitors add capacity faster than expected, or if customers push back against higher pricing.

Competition is intense. Samsung Electronics, SK Hynix, Micron Technology and SanDisk remain key players across memory markets, with SK Hynix holding a dominant position in high-bandwidth memory used in AI accelerators. Kioxia’s strength is more closely tied to NAND flash and SSDs, where demand from AI infrastructure has broadened the market but does not eliminate the risk of oversupply once new capacity comes on stream.

Toyota’s relative decline in the rankings does not point to operational weakness alone. The carmaker remains one of the world’s largest manufacturers by sales and a major profit generator, but investors have been rotating away from traditional industrial leaders towards companies with direct AI exposure. Concerns over electric-vehicle competition, currency movements and the cost of future technologies have weighed on auto valuations, even as Toyota continues to command global scale in hybrid vehicles and supply-chain management.

SoftBank’s ascent has further highlighted the changing market narrative. Its exposure to Arm and AI-related investments has drawn investors seeking Japan-based access to global AI infrastructure. Together, SoftBank and Kioxia now represent a market story centred on chips, data centres, software platforms and computing capacity rather than the export-led industrial model that long defined Japan’s equity market.

Foreign investor flows have amplified the shift. Japan’s equity market has benefited from corporate-governance reforms, stronger capital returns and renewed interest in companies linked to the AI supply chain. The Nikkei 225 has reached record territory, though the rally has been uneven, with gains concentrated in a limited group of technology-linked names while broader market performance has been more mixed.

Kioxia’s next test will be whether it can convert favourable pricing and sold-out capacity into durable earnings. Investors will look for clearer shareholder-return plans, disciplined capital expenditure and evidence that AI storage demand can remain strong beyond the current investment wave. The company’s contemplated US share listing would widen access to global technology investors and could further raise its profile if market conditions remain supportive.