The global AI boom has turned a 139-year-old unknown Japanese company into a stock market star.
Fujikura, which makes wire cables for data centers, is the top performer on the Nikkei 225 stock index, with its stock price soaring more than 400% this year. The company will join the MSCI Global Standard Index on November 25th as the only Japanese company added, excluding eight other Japanese companies.
The company is a typical “grab-and-bag” investment as technology companies and utilities pour money into building the infrastructure needed to support AI. Building the data centers, power supply, and communication networks needed for AI will require at least 1 trillion dollars Percent of spending, according to a Bloomberg News analysis. Fujikura itself has been surprised by the industry’s rapid growth.
Kazuhito Iijima, Fujikura’s chief financial officer, said in an interview that “demand for data centers has been rapidly increasing since around 2022.” “We didn’t really understand it at the time, but this year it became clear that it was all about AI.”
Fujikura counts Apple Inc. as its biggest customer and specializes in fiber optic cables. Iijima said the company’s product has the industry’s smallest diameter, allowing it to be used in tight spaces without the need for additional tunneling.
Earlier this month, the company raised its operating profit forecast for the current fiscal year to 104 billion yen ($674 million), an increase of 17%. it gets That’s all 70% of its revenue comes from overseas and about 38% from the United States. According to McKinsey & Company, global data center capacity is expected to grow at an average rate of 33% each year through 2030.
“This area is still in the early stages of development,” said Kazuhiro Sasaki, head of research at Philip Securities Japan. “This field itself should continue to grow as the amount of data increases as systems become larger and more data is added.”
company trace its roots Until 1885, when the company’s founder, Zenpachi Fujikura, began manufacturing silk and cotton-insulated electric wire. For centuries, it grew with the country’s industrialization, supplying cables for the burgeoning auto industry, public utilities, and Japan’s bullet trains.
The current boom is in stark contrast to 2020, when the company posted its first loss in more than a decade. The coronavirus pandemic and U.S.-China trade tensions have hurt Fujikura’s sales. The company is determined to avoid the threat of tariffs in its biggest market as Donald Trump returns to the White House next year. We are taking steps to comply with Build America, Buy America activitywhich requires industrial products and construction materials used in infrastructure projects to be produced in the United States.
“We have just completed the establishment of a BABA-compliant production site for ultra-high-density fiber optic cables in the United States,” said Iijima. This will protect the company’s business “even if new issues arise that are detrimental to imported materials,” he said.
The stock price has become expensive due to the significant rise in stock prices. Fujikura is trading at a price-to-earnings ratio of approximately 29 times. [hotlink]Sumitomo Electric Industries[/hotlink] Ltd. and Furukawa Electric are trading at 11.8 and 20 respectively. Analysts have a bullish outlook on the company, with 10 buys, 3 holds, and no sells. Still, some believe rivals offer higher returns.
“Given Fujikura’s significant outperformance, there should be further upside for Furukawa Electric and Sumitomo Electric,” said Andrew Jackson, head of Japanese equity strategy at Altus Advisors.
Surprised by the AI boom, the company says it has already identified its next big opportunity: nuclear fusion. The theoretically limitless potential of clean energy has won support from several billionaires, including Sam Altman, Jeff Bezos, and Bill Gates. This technology has not been proven to be effective in generating electricity on a large scale, but if it were to do so, cables and wires would be needed.
Mr. Iijima said, “I hope that it will become a pillar of the industry from 2030 onwards.”
