Kioxia's 45-Fold Profit Surge Clouded by Weak Outlook as AI Memory Chip Boom Shows Signs of Cooling

Chipmaker Kioxia reports AI-driven 45-fold surge in quarterly net profit

Tokyo (AFP) - Ferocious AI-driven demand delivered quarterly net profit more than 45 times higher than last year's figure for Japanese chipmaker Kioxia, the company said Friday. The global race to build artificial intelligence data centres has turbocharged business for chipmakers -- sending prices soaring for memory components in particular. Kioxia specialises in so-called NAND flash chips, an increasingly hot commodity as AI agents -- tools that carry out real-life tasks for users -- require ever-more storage space. Kioxia said net profit in the April-June quarter came to 842.2 billion yen ($5.3 billion), a huge jump from 18.3 billion yen in the same period a year ago. Operating profit was up around 2,700 percent year-on-year at 1.3 billion yen. Both figures missed analyst estimates in a Bloomberg survey of economists. Tech shares have seen rollercoaster volatility in recent days, as investors lurch between bullish optimism over sustained AI demand, and fears that the big valuations are unrealistic. Kioxia's shares lost more than half their value over the past month, but are still up nearly 1,500 percent over the past year. The chipmaker even briefly became Japan's most valuable company in June. It is a similar story for South Korea's Samsung Electronics and SK hynix, leading players in the market for advanced memory chips known as HBM, also in huge demand thanks to AI. Both those companies posted eye-watering profit jumps this week, while their share prices have gone haywire, with SK hynix skyrocketing 30 percent on Friday. SK hynix's surge was helped by confirmation that the chair of its parent company had bought around $3 million worth of shares, seen as a vote of confidence after recent steep losses. Kioxia started life as Toshiba Memory, a pioneering memory chip business that Japanese conglomerate Toshiba, then in dire financial straits, sold off in 2018. Now the company says it is planning a US listing like SK hynix, which this month made its Wall Street debut after one of the world's biggest ever stock sales.

Kioxia's outlook miss clouds optimism about memory chip boom

Kioxia Holdings issued a disappointing earnings outlook after results missed expectations, a sign that an unprecedented AI-driven surge in flash memory prices may be moderating. The Japanese chip leader on Friday forecast operating income of ¥3.16 trillion ($19.7 billion) for its fiscal half-year, which translates into a weaker-than-anticipated ¥1.89 trillion projection for the current quarter. That's after it posted June-quarter operating income of ¥1.27 trillion, missing analysts' estimates. The company also announced a 3-for-1 stock split and a buyback of up to ¥800 billion, taking action to broaden its shareholder base and reduce volatility. Investors had high hopes for Kioxia, one of the prime beneficiaries of a historic AI data center buildout. The former Toshiba unit supplies the NAND storage chips that go into data center servers, tracking ballooning spending by big tech firms including Meta Platforms. But its underwhelming guidance added to concern raised earlier on Friday by Murata Manufacturing President Norio Nakajima, who said that the current pace of spending by the world's largest data center operators won't last because of increasing competition and debt levels. Murata pointed to potential revisions in spending plans and Kioxia, for its part, is proceeding cautiously too: The company has said it plans to increase capacity only slightly faster than industry growth, to avoid flooding the market. Kioxia's approach risks market-share losses to larger and deeper-pocketed rivals. Samsung Electronics and SK Hynix are expected to introduce next-generation NAND chips next year. Kioxia's challenge is to catch up with its South Korean rivals in production volume. Kioxia shares have gone through wild fluctuations. At one point this year, it overtook Toyota Motor and SoftBank Group to briefly become Japan's most valuable company. Then a steep slide erased two-thirds of those gains in just a month, as investors grew concerned about the fragility of AI spending and Kioxia's outlook. "While the size of the share buyback is exceptionally large for a Japanese company, it is unclear whether it will be enough to offset the earnings miss," said Tomoichiro Kubota, chief market analyst at Matsui Securities. The company has to work harder to attract the so-called U.S. hyperscalers, which have stronger ties with South Korean suppliers, said Akira Minamikawa, an analyst at Omdia. Those data center operators now seek multiyear supply contracts, giving component suppliers greater visibility into demand.