Japan-based cable manufacturer Fujikura Ltd. has seen its stock surge approximately 1,400% over the past two years, driven by insatiable global demand for its cables from newly constructed data centers. However, the company now faces a critical challenge—its production capacity cannot keep pace with demand.
CEO Naoki Okada revealed in a recent interview that additional capital expenditure will be "necessary" to meet AI-related demand, with the company currently negotiating new investment rounds. The new investment plan may be announced in Fujikura's mid-term strategy report due in May.
The fiber optic cable supply shortage highlights potential risks for investors flocking to AI-related companies, particularly for Fujikura, which has delivered one of the strongest performances among global tech stocks in recent years. On Thursday, Fujikura's shares fell 3.4% to ¥15,960 in Tokyo trading amid broader AI sector concerns following news that Blue Owl Capital would not fund Oracle's data center projects.
"Fujikura remains our top pick among Japanese cable manufacturers due to its exposure to hyperscalers' capex and high-margin telecom products, though we've reduced some positions after Q3's overheated rally," said Richard Aston, portfolio manager at Chikara Investments LLP. Fujikura's stock has outperformed tech giants like Nvidia, and as of November, it ranked among the top ten holdings in Aston's CC Japan Income & Growth Trust fund.
"Supply capacity is a recognized risk, but their pricing power in this strong demand environment should help manage production schedules," Aston noted.
Founded in 1885, Fujikura is pushing for new investments to meet U.S. market demands. In October, the White House selected Fujikura to supply up to $20 billion worth of fiber optic cables for AI infrastructure. Prior to any U.S. investment talks, Fujikura had already announced plans to spend ¥45 billion ($289 million) on a new factory.
"Clearly, our current capacity cannot meet demand if we build these generative AI infrastructures," Okada stated, adding that while the investment timeline remains unclear, even spread over ten years, the amount would be substantial.
The CEO confirmed Fujikura has secured fiber supply agreements with several global firms and aims to boost productivity at existing plants to bridge manufacturing gaps before new capacity comes online. The 61-year-old executive, who personally helped develop Fujikura's "spider web ribbon fiber" technology for data centers two decades ago, said the company now works with nearly all hyperscale cloud providers.
"I never imagined we'd reach this scale," Okada admitted, acknowledging that surging AI-driven data center demand means Fujikura "simply cannot satisfy all customers." Clients include Apple and Toyota Motor.
Morgan Stanley MUFG Securities analyst Yu Shirakawa maintained in a December report that Fujikura should sustain strong growth through product mix optimization and connector sales, raising the price target from ¥14,000 to ¥21,500. Last month, Fujikura increased its full-year operating profit forecast by 26% to ¥179 billion, with potential further upside from yen weakness as overseas sales account for 75% of revenue.
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