IR Day reinforces Goldman Sachs' Buy view on Kioxia: AI and eSSD demand support a high-profit NAND cycle
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IR Day reinforces Goldman Sachs' Buy view on Kioxia: AI and eSSD demand support a high-profit NAND cycle
Goldman Sachs believes that the demand, LTA, and capital expenditure information disclosed by Kioxia during IR Day further supports the view that the NAND industry can maintain relatively high and more stable profits over the next 2-3 years.
- Management expects the NAND market to grow at a 22% CAGR by capacity from CY25 to CY28, above the 20% guidance given a year ago.
- Data center NAND demand is driven by inference AI and is expected to grow at a 46% CAGR, with Kioxia aiming to raise its eSSD share from about 10% to about 15%.
- The company expects tight NAND supply-demand conditions to last at least until 2H27, with current LTA coverage for the next two years at about 50% and planned to increase further.
- Capital expenditure for FY3/27-FY3/29 is planned at about ¥470 billion per year, mainly for BiCS 8 and BiCS 10 equipment at the existing Yokkaichi Y7 and Kitakami K2 sites.
- Goldman Sachs maintains its Buy rating and 12-month target price of ¥93,000, believing the market still does not fully reflect the higher and more sustainable profit levels over the next 2-3 years.
Report interpretation
Overview
This report summarizes Kioxia Holdings' Investor Day held after the market close on June 2, 2026. The company focused on NAND demand outlook driven by AI applications, long-term agreements (LTAs), capital expenditure, and shareholder returns. Goldman Sachs believes this information validates its previously upgraded view on the NAND market: the industry remains cyclical, but can sustain profit levels over the next 2-3 years that are higher than in past cycles.
Core views
The core view is that NAND demand will continue to outpace supply. The growing importance of storage in AI inference servers means NAND and SSDs are no longer merely simple storage components, but key devices affecting system performance. Progress in LTA negotiations should help reduce volatility at the bottom of the profit cycle, while disciplined capital expenditure may prevent supply from expanding too quickly. Based on these factors, Goldman Sachs expects Kioxia's share price to have further upside.
Analysis framework
Starting from management's IR Day information, the report breaks down four threads—demand, business model, capital expenditure, and capital allocation—and cross-validates them against Goldman Sachs' revised view on the NAND cycle in its May 31 report. For valuation, it uses the correlation between P/B and average ROE for FY3/27E-FY3/28E to determine the target price.
Methodology notes
Derive the 12-month target price using the correlation between average FY3/27E-FY3/28E ROE and P/B.
Goldman Sachs gives a 12-month target price of ¥93,000, corresponding to FY3/27E P/E of 9.5x and P/B of 8.0x.
Compare the stock's attributes versus the market and industry peers across growth, financial returns, valuation multiples, and composite indicators.
This framework uses analyst forecasts for sales, EBITDA, EPS, ROE, ROCE, CROCI, and valuation metrics, converting standardized rankings into percentiles.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Kioxia Holdings (285A.T)The report directly covers the company and maintains a Buy rating.
- Strengths
- Relatively strong cost competitiveness; tightening NAND supply and demand; growth optionality from AI data center and eSSD product progress; LTAs help stabilize profit margins.
- Weaknesses
- The NAND industry remains cyclical, with more participants than the HDD and DRAM markets, so prices and capacity utilization may still fluctuate.
- Comparison
- Goldman Sachs says Kioxia is the world's third-largest NAND flash manufacturer and believes its relatively high profitability and progress in data center products are positive.
- Risks
- A slowdown in AI investment, the rise of Chinese NAND competitors, higher costs or fluctuations in capacity utilization, rapid yen appreciation against the US dollar, and weaker non-AI NAND demand.
- NAND and eSSD industry chainKioxia's performance is highly correlated with NAND supply-demand conditions, eSSD demand, and AI server storage architecture.
- Strengths
- Inference AI elevates the strategic role of SSDs in system performance, while enterprise SSD demand and tight HDD supply together support NAND prices.
- Weaknesses
- Demand from non-AI applications such as PCs and smartphones is relatively weak, and the industry may still be affected by supply expansion.
- Comparison
- Compared with the HDD and DRAM markets, NAND has more participants, so Goldman Sachs does not believe the industry structure has fundamentally changed.
- Risks
- Changes in investment direction by major storage manufacturers, export control impacts, changes in DRAM procurement paths, and expansion by Chinese manufacturers could all alter the supply-demand landscape.
Key data
- NAND market capacity growthCY25-CY28 CAGR 22%Above the 20% CAGR guidance given at the company's strategy meeting a year ago.
- Data center NAND growthCAGR 46%Growth is mainly driven by inference AI applications.
- eSSD share targetfrom about 10% to about 15%The company plans to develop and launch new products better suited to customer needs.
- Duration of supply-demand tightnessat least until 2H27Management expects NAND demand to continue exceeding supply.
- LTA coverageabout 50% over the next two yearsThe company is negotiating with multiple customers, some agreements have already been signed, and it plans to continue increasing coverage.
- Capital expenditure planabout ¥470 billion annually in FY3/27-FY3/29FY3/27 capex guidance is ¥450 billion, and FY3/28 is expected to remain at a similar level.
- Existing capacity headroomexisting facilities are expected to support through 1H2029Investment is focused on the Yokkaichi Y7 and Kitakami K2 sites; new domestic facilities may be needed after 2030.
- Target price¥93,000Based on the correlation between P/B and average FY3/27E-FY3/28E ROE, implying FY3/27E P/E of 9.5x and P/B of 8.0x.
Impact & implications
If AI-related NAND demand remains strong, LTA coverage continues to rise, and industry supply stays disciplined, Kioxia's profit volatility could be shallower than in historical cycles, and its valuation center could also find support. For investors, the key is not just short-term NAND price increases, but whether the market recognizes the stability and sustainability of earnings over the next 2-3 years.
Risks
- A slowdown in AI investment centered on hyperscalers.
- The rise of Chinese NAND manufacturers and intensified competition.
- Higher costs or capacity utilization fluctuations leading to lower margins.
- A sharp appreciation of the yen against the US dollar compressing earnings.
- Slower NAND demand from non-AI applications.
- Although LTA progress is being made, the company still wants to retain medium-term flexibility, so profit stability is not fully locked in.
What to watch
- Whether NAND demand exceeding supply can continue beyond 2H27.
- Whether LTA coverage over the next two years will increase further from about 50%.
- Whether eSSD market share can rise from about 10% to about 15%.
- Whether annual capital expenditure of about ¥470 billion for FY3/27-FY3/29 remains disciplined.
- The progress of equipment investment at the Yokkaichi Y7 and Kitakami K2 sites, and whether a new Kitakami plant will be needed after 2030.
- The progressive base dividend planned to start from FY3/28, and whether it will be brought forward to 2H FY3/27.
- NAND prices, AI server demand, DRAM investment priorities, and the impact of equipment export controls on major Korean memory makers' wafer fabs in China.