Fujikura: 139-Year-Old Japanese Cable Maker Becomes Stock Market Star Amid AI Boom

Japanese cable maker Fujikura sees stock surge 400% on AI-fueled demand

In context: Fujikura Ltd., founded by Zenpachi Fujikura in 1885, continues to thrive, fueled by the rapid growth of AI products and research initiatives. Originally focused on producing silk and cotton-insulated wires, the company has evolved to specialize in advanced cable systems for the modern tech industry. After barely weathering the pandemic in 2020, Fujikura is now enjoying a period of unprecedented growth in the Japanese stock market, driven by demand in AI and data center operations. The Tokyo-based company specializes in manufacturing electrical equipment, including power and telecommunication systems, optical fiber devices, and more. According to a recent Bloomberg report, Fujikura has become the best-performing stock on the Nikkei 225 Stock Average, with its share price surging over 400 percent in 2024. The company is also set to join the widely followed MSCI global stock market index. One of Fujikura's most in-demand products is its ultra-thin fiber optic cables, which boast some of the smallest diameters in the industry. These cables can be deployed in tight spaces without requiring additional tunneling, according to CFO Kazuhito Iijima. Notably, Apple is one of Fujikura's largest customers. Iijima noted that demand for data center products began surging significantly around 2022, leaving company executives puzzled at first. Now, it's clear that AI is the primary driver behind the booming business. Fujikura is projected to achieve ¥104 billion ($674 million) in operating income during the current fiscal year, marking a 17 percent year-over-year increase. A substantial 70 percent of Fujikura's revenue comes from outside Japan, with 38 percent originating from the United States. In 2020, the company faced its first loss in a decade, attributed to the Covid-19 pandemic and escalating trade tensions between the US and China. The return of the Trump administration could reignite these challenges, but Fujikura has been preparing for such scenarios. To mitigate risks, Iijima confirmed that the company has established a US-based production facility dedicated to manufacturing high-density optical fiber cables. The plant is designed to comply with the Build America Buy America Act, ensuring resilience "even if new issues arise that are disadvantageous to imported materials," Iijima stated. Looking ahead, Fujikura is preparing for emerging opportunities as global data center capacity is projected to grow by 33 percent annually through 2030, according to McKinsey & Company. The company is also exploring future markets, with nuclear fusion reactors - a potential clean energy breakthrough - seen as a promising avenue that will likely require extensive cabling solutions.

AI boom makes 139-year-old cable company Japan's hottest stock

The global boom in AI has turned an obscure 139-year-old Japanese company into a stock-market star. 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. The current boom stands 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 ate into Fujikura's sales. With Donald Trump returning to the White House next year, the company is determined to avoid the threat of tariffs in its largest market. It has taken measure to comply with the Build America, Buy America Act, which requires that manufactured products and construction materials used in infrastructure projects are produced in the US. "We have just completed setting up a production base, which is BABA-compliant, for ultra high-density optical fiber cables in the United States," said Iijima. This will protect its business "even if new issues arise that are disadvantageous to imported materials," he said. The massive run-up in the shares has made the stock expensive. Fujikura is trading at a price-to-earnings ratio of about 29 while those of its peers such as [hotlink]Sumitomo Electric Industries[/hotlink] Ltd. and Furukawa Electric Co. are trading at 11.8 and 20 respectively. Analysts are bullish on the company with 10 buys, 3 holds and no sells. Still, some think its rivals will offer better returns. "There should be more upside for Furukawa and Sumitomo Electric given the huge out-performance for Fujikura," 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 backing of multiple billionaires, including Sam Altman, Jeff Bezos and Bill Gates. While the technology has not been proven to work for large scale production of electricity, if and when it does, there will be a need for cables and wires. "We hope that this will become a pillar of the industry from 2030 onwards," Iijima said.

AI boom makes 139-year-old cable maker Japan's hottest stock

The global boom in artificial intelligence (AI) has turned an obscure 139-year-old Japanese company into a stock market star. Fujikura, which makes wire cabling for data centers, is the best performer on the 225-issue Nikkei 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.

AI Boom Makes 139-Year-Old Cable Maker Japan's Hottest Stock

The global boom in AI has turned an obscure 139-year-old Japanese company into a stock-market star. 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.