Bain Capital Exits Kioxia After Chip Deal Yields Big Returns

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Bain Capital has sold its entire stake in flash memory chipmaker Kioxia Holdings Corp., closing a chapter on a deal that’s transformed the Japanese tech and investment landscape.

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“We don’t have a stake any more in Kioxia,” Bain Managing Partner David Gross said in an interview on Bloomberg Television. The US private equity firm has logged record-setting returns after a global spending spree on AI catapulted Kioxia’s shares more than 4,500% from their debut, transforming the chipmaker into one of Japan’s most valuable companies. 

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“It’s worked spectacularly for all the stakeholders involved,” Gross said.

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Kioxia’s shares surged around 7% Thursday in Tokyo, buoyed by exuberance about demand for memory and data storage alongside AI adoption. Bain’s exit follows months of winding down its position. In 2018, a Bain-led group including SK Hynix Inc. bought Toshiba Corp.’s former memory operations for $18 billion. A Bain spokesperson said a special-purpose investment vehicle it set up for SK Hynix still holds a 14% stake in Kioxia.

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“The fact that such a large number of shares could be sold means there are buyers, including overseas institutional investors,” said Ikuo Mitsui, a fund manager at Aizawa Securities Co. This removes a drag on Kioxia’s shares, since the market no longer needs to calculate in the risk of Bain unloading its stake, he said.

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The share sale coincides with investors seeking to justify sky-high valuations around AI. Global semiconductor shares jumped to record levels this year but have hit turbulence on fears about increased competition, possible overcapacity and whether plans for hundreds of billions of dollars in investment will pay off. 

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“Net-net this is a positive, versus a signal that we have reached the top. What an amazing trade,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors.

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For years, Kioxia grappled with one of the worst downturns in the memory-chip sector. But since their listing in 2024, Kioxia’s shares have surged on runaway demand for AI memory chips, making it the best-performing stock on the MSCI World Index.

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Kioxia’s shares are down around 30% from a peak in June, but the company’s comeback will likely remain among private equity’s great success stories.

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Toshiba sold the chip business to help repair a balance sheet hammered by losses from a push into nuclear energy and a prolonged accounting scandal. The deal freed Kioxia from its parent’s struggles and allowed it to invest in production capacity and technologies when it needed to, paving the way for Japan to participate in the ongoing global AI race, Gross said.

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“This was a crown jewel, one of the top technology-driven companies and conglomerates with an amazing history in Toshiba,” he said. The turnaround has given additional credibility to private equity’s promise to “take businesses that may have had some struggles and get them on a growth footing,” he said.