Kioxia Japan Shares Surge More Than 645%. Topping World’s Best-Performing Semiconductor Manufacturer, Can Investors Still Buy Now?

TradingKey - Since its Tokyo listing in December 2024, Kioxia Holdings has taken just a year and a half to leap from its IPO to being among Japan's top three companies by market capitalization. As of the Asian trading session on June 3, Kioxia's Japanese shares have seen year-to-date gains reaching 660%, topping the global leaderboard for annual growth among semiconductor manufacturers.

Earlier during the Asian session on June 1, Kioxia's stock price surged as much as 11% after Goldman Sachs significantly raised its price target from 48,000 yen to 93,000 yen and upgraded its rating from 'Neutral' to 'Buy.' The company's market capitalization quickly climbed to approximately 39.7 trillion yen, putting Toyota Motor within its sights as a target to overtake.

The Logic Behind the Earnings Surge

From January to March 2026, Kioxia's revenue reached 1.0029 trillion yen, a 189% year-on-year surge, while operating profit soared 15-fold to 596.8 billion yen, setting a new record for quarterly profit. The USD-denominated average selling price (ASP) for NAND flash doubled in a single quarter, even as shipment volume fell by approximately 10% sequentially.

Explosive demand for NAND from AI data centers, combined with the fact that new supply-side capacity will not come online until late 2027 at the earliest, is handing absolute pricing power to memory manufacturers.

[Q1 FY2026 Guidance, Source: Kioxia FY2025 Financial Results Overview ]

Looking ahead to the April-June quarter, Kioxia's guidance is even more staggering, with revenue projected to reach 1.75 trillion yen, up 74.5% sequentially, and operating profit expected at 1.3 trillion yen, up 117% sequentially, representing a 74% profit margin. This profitability has begun to surpass that of software companies known for their high gross margins.

The Core of Valuation Divergence

Based on 2027 earnings forecasts, its forward P/E ratio is only 7.9x, representing a roughly 20% discount to SK Hynix and appearing quite cheap within the AI sector.

This is the core logic behind Goldman Sachs raising its price target to 93,000 yen; analysts predict that Kioxia's consolidated operating profit for fiscal year 2028 will soar to the 10 trillion yen level, with gross margins sustained at around 80%. Based on these calculations, the PEG ratio is only 0.10x, suggesting that growth appears to be completely unpriced.

[Kioxia's 2026 forward P/E ratio is 8.8x, exceeding Samsung Electronics and SK Hynix; Source: Stockanalysis]

At current stock prices, the trailing P/E ratio is nearly 77x with a P/B ratio of 30.2x; its 2026 rolling P/E ratio is 8.8x, still higher than Samsung's 5.7x and SK Hynix's approximately 6x.

[Forward P/E for Samsung Electronics and SK Hynix; Source: Stockanalysis]

Market analysts are deeply divided over Kioxia. Among the 14 analysts who provided price targets, the most optimistic set a target price of 80,000 yen, while the most pessimistic set it at just 17,000 yen, representing a gap of nearly five times. Such extreme divergence indicates that the market has yet to reach a consensus on the feasibility and sustainability of Kioxia's future earnings.

Upside elasticity and downside risks coexist.

The duration of the supply-demand gap is the primary source of upside elasticity. Previously, Kioxia management explicitly stated that "the NAND market will be extremely tight in both 2026 and 2027," with new capacity only expected to come online by late 2027 or even 2028 at the earliest. This suggests that the pricing environment still has support for continued improvement in the short term.

Meanwhile, consistent with the logic for SK Hynix, Kioxia's secondary listing in the U.S. is a structural catalyst for further valuation upside. Kioxia has announced plans for an ADS listing in the U.S. If successfully listed, the ease of allocation for international investors into the NAND sector will improve significantly, potentially driving its valuation framework closer to U.S.-listed peers such as Micron and SanDisk.

Investors should note that market bears argue NAND is a typical cyclical commodity, and the supply-demand gap could shift from "shortage" to "surplus" at any point—a risk validated many times by history. A large volume of AI orders has crowded out NAND capacity; if AI capital expenditure signals a marginal slowdown, the current premium could be quickly relinquished.

Furthermore, some analysts believe the current quarterly operating profit target of approximately 1.3 trillion yen, equivalent to over 5 trillion yen annualized, "is likely more than double Toyota's peak profit." Whether this can be sustained in the short term still requires verification through financial performance.

Summary

From an optimistic perspective, the supply-demand gap is expected to persist at least until 2028. Furthermore, the potential listing of ADS in the U.S. is poised to expand the valuation premium, while guidance for a 74% operating margin and a sustained 80% gross margin provides strong support for high profitability.

From the perspective of positioning, there is little margin for error between the current price and the target price. For short-term investors, the current liquidity environment implies that entry and exit costs have been systematically elevated, making the risk-reward profile for entering at this stage unattractive. Conversely, for long-term investors, the accelerating upward revisions of earnings data and the widening supply-demand gap continue to provide long-term support for core fundamentals.