The global AI boom has turned an obscure 139-year-old Japanese company into a stock market star.
Fujikura Ltd., which makes wire cables for data centers, is the top performer on the Nikkei 225 Stock Average, and its shares have risen more than 400% this year. MSCI will join the benchmark global indices on November 25, with Japan as the only addition, eight other companies from the country will be removed.
The company is a classic “pick and shovel” investment, as tech companies and utilities pour money into building the infrastructure needed to support AI. At a minimum, building data centers, power supplies, and communications networks will be necessary for AI $1 billion by spending, according to an analysis by Bloomberg News. The industry’s rapid growth has surprised Fujikura himself.
“Demand for data centers has peaked around 2022,” Kazuhito Iijima, Fujikura’s chief financial officer, said in an interview. “We didn’t quite understand it at the time, but this year it became clear that it was all about AI.”
Fujikura, which counts the apple Inc. among its biggest customers, it specializes in fiber optic cables. Its products have some of the smallest diameters in the industry, allowing them to be used in tight spaces without the need for additional tunneling, according to Iijima.
The company earlier this month raised its operating income guidance by 17% to 104 billion yen ($674 million) for the current fiscal year. It is achieved more than 70% of its revenue comes from overseas, and about 38% comes from the US. Global data center capacity is expected to grow at an average annual rate of 33% through 2030, McKinsey & Company.
“The field is still in the early stages of development,” said Kazuhiro Sasaki, head of research at Phillip Securities Japan. “The amount of data will increase as the scale of the system increases and more data is added, so this field itself should continue to grow.”
the company it has its roots Until 1885, when founder Zenpachi Fujikura began making insulated silk and cotton threads. Over the centuries, it grew alongside the country’s industrialization, supplying cables for Japan’s burgeoning automotive industry, utilities and bullet trains.
The current boom is in stark contrast to 2020, when the company posted its first loss in more than a decade. The Covid pandemic and trade tensions between the US and China took a toll on Fujikura’s sales. With Donald Trump back in the White House next year, the company is determined to avoid the threat of tariffs in its biggest market. Build America, Buy America has taken action to fulfill Get startedthat manufacturing and construction materials used in infrastructure projects must be produced in the US.
“We have just finished setting up a production base for very high density fiber optic cables in the US, which is BABA compliant,” Iijima said. This will protect his business “even if it creates new problems that are disadvantageous for imported materials,” he said.
The dramatic rise in stocks has made stocks more expensive. Fujikura is trading at a price-to-earnings ratio of around 29, while peers such as (hotlink)Sumitomo Electric Industries(/hotlink) Ltd. and Furukawa Electric Co., trading at 11.8 and 20 respectively. Analysts are very bullish on the company with 10 buys, 3 holds and no sells. However, some believe that rivals will offer better returns.
“Furukawa and Sumitomo Electric should have more upside given Fujikura’s strong performance,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Ptd Ltd.
After being surprised by the AI boom, the company says it has already identified the next big opportunity: nuclear fusion. The prospect of theoretically limitless clean energy has won the support of several billionaires, including Sam Altman, Jeff Bezos and Bill Gates. Although the technology has not been proven to work for large-scale production of electricity, if and when it does, cables and wires will be needed.
“We hope that after 2030 this will become a pillar of the industry,” Iijima said.
