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(Bloomberg) — The global frenzy in AI has turned an obscure Japanese company into a stock-market star.
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Fujikura Ltd., which makes wire cabling for data centers, is the best performer on the Nikkei 225 Stock Average index, with its shares surging more than 400% this year. It will join the MSCI global standard indexes on Nov. 25 as the sole addition from Japan while eight other companies from the country will be removed.
The firm is a classic ‘picks and shovels’ investment as tech companies and utilities pour money into building out the necessary infrastructure to support AI. Construction of the data centers, electricity supplies and communications networks needed for AI will require at least $1 trillion of spending, according to an analysis by Bloomberg News. The rapid growth of the industry has surprised Fujikura itself.
“The demand for data centers has skyrocketed since around 2022,” said Kazuhito Iijima, Fujikura’s chief financial officer, in an interview. “We didn’t quite understand it that well at that time, but it became clear this year that it was all about AI.”
Fujikura, which counts Apple Inc. among its biggest customers, specializes in fiber optic cables. Its products have some of the smallest diameters in the industry, which allows them to be used in narrow spaces without the need for additional tunneling, according to Iijima.
The company boosted its operating income guidance earlier this month by 17% to ¥104 billion ($674 million) for the current fiscal year. It gets over 70% of its revenue overseas, with about 38% coming from the US. Global data center capacity is expected to rise at an average rate of 33% annually through 2030, according to McKinsey & Company.
“The area 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 becomes larger and more data is added, so this field itself should continue to grow.”
The company traces its roots to 1885, when founder Zenpachi Fujikura started making wires insulated with silk and cotton. Over the centuries, it grew with the country’s industrialization, supplying cables for the burgeoning automotive industry, utilities and Japan’s bullet trains.