AI Surge Make 139-Year-Old Japanese Cable Firm Fujikura into Market Leader

Fujikura Ltd., a leader in wire cabling for data centers, has become the top performer on the Nikkei 225 Stock Average this year, with shares soaring over 400%. On November 25, it will join the MSCI Global Standard Indexes as Japan’s sole addition, while eight other Japanese companies face removal.

As a prime example of a “picks and shovels” investment, Fujikura benefits from the massive investments tech companies and utilities are making in infrastructure to support AI. Bloomberg News estimates at least $1 trillion will be spent on building data centers, power supplies, and communication networks essential for AI. This rapid growth even caught the company by surprise.

“The demand for data centers has skyrocketed since around 2022,” said Kazuhito Iijima, Fujikura’s Chief Financial Officer. “We didn’t fully grasp it at the time, but this year it became clear that AI was driving it.”

Fujikura, a key supplier to Apple Inc., specializes in fiber optic cables. Its products stand out with some of the industry’s smallest diameters, enabling use in tight spaces without requiring additional tunneling, according to Iijima.

Resilience Amid Growth: Fujikura’s Path Forward

Fujikura recently raised its operating income forecast by 17%, projecting ¥104 billion ($674 million) for this fiscal year. The company generates over 70% of its revenue internationally, with about 38% coming from the U.S. McKinsey & Company estimates global data center capacity will grow 33% annually through 2030, driving further opportunities in this space.

“The area is still in the early stages of development,” noted Kazuhiro Sasaki, head of research at Phillip Securities Japan. “As systems expand and more data is integrated, the field should continue to grow.”

Fujikura’s history dates back to 1885 when founder Zenpachi Fujikura began producing silk- and cotton-insulated wires. Over time, it evolved with Japan’s industrial growth, supplying cables for the automotive industry, utilities, and the iconic bullet trains.

This momentum is a sharp turnaround from 2020, when the company faced its first loss in over a decade. The COVID-19 pandemic and U.S.-China trade tensions heavily impacted sales. With Donald Trump potentially returning to the White House, Fujikura is proactively mitigating risks. The company has taken steps to comply with the Build America, Buy America Act, ensuring its products meet U.S. manufacturing requirements to avoid future tariffs in its largest market.

“We recently established a production base in the United States that complies with BABA standards for ultra high-density optical fiber cables,” said Iijima. He emphasized that this move safeguards the business “even if new challenges emerge that impact imported materials.”

Balancing Valuation and Future Potential

Fujikura’s soaring stock price has made it an expensive investment. The company trades at a price-to-earnings ratio of about 29, compared to peers like Sumitomo Electric Industries Ltd. at 11.8 and Furukawa Electric Co. at 20. While analysts remain optimistic, with 10 buy ratings, three holds, and no sells, some believe competitors may deliver better returns.

“Furukawa and Sumitomo Electric should see more upside given Fujikura’s significant outperformance,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Ptd Ltd.

After capitalizing on the AI boom, Fujikura is already preparing for the next big wave—nuclear fusion. This potential source of limitless clean energy has gained support from billionaires like Sam Altman, Jeff Bezos, and Bill Gates. Although large-scale production remains unproven, the demand for cables and wires will skyrocket if the technology succeeds.

“We hope this will become a pillar of the industry from 2030 onwards,” Iijima said.