- Fujikura's fall wiped out nearly $40 billion in market value while many investors quickly sold their shares following disappointment over the company’s earnings forecast and future business plans.
- Fujikura's situation has also raised concerns about how unstable the global artificial intelligence related stock boom can be.
- Analysts believe one of the main problems is that Fujikura has struggled to increase production fast enough to match growing deman
Fujikura, the Japanese company known for making optical fiber cables, has seen a sharp fall in its stock price after reaching record highs earlier this month. The company's shares recently fell to around ¥5,329. Reports say the fall wiped out nearly $40 billion in market value while many investors quickly sold their shares following disappointment over the company's earnings forecast and future business plans.
Although the stock has recovered slightly since the decline, it still remains far below its earlier peak. The situation has also raised concerns about how unstable the global artificial intelligence related stock boom can be. Analysts believe one of the main problems is that Fujikura has struggled to increase production fast enough to match growing demand.
Norikazu Shimizu, an analyst at Iwai Cosmo Securities, told Bloomberg, “The fact that Fujikura hasn't been able to sufficiently expand capacity has created a gap between market expectations and reality. Even if they want to produce more, they just can't fully meet demand.”
“Should the market wake up and realize that data center builds are being either delayed at their start or their completion given bottlenecks for power, I think cable guys are the first to get totally derated,” Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors added.
Pelham Smithers Associates analyst William Nestuk shared that new improvements in transceiver technology may lower the need for cables in future data centres, which could impact companies like Fujikura. However, the analyst believes this change is still a few years away from causing any serious drop in demand.
Fujikura also works with strong clients like Apple, which brings in around 4% of its income. Because of this stable customer base, Nestuk believes the company's stock might improve. At the same time, the analyst says the recent decline shows that investor excitement around artificial intelligence related infrastructure companies may be slowing down.
Reports say that demand for cables is still expected to stay strong in the coming years. Experts predict that the global need for data centre cables will increase by 22.4% between 2024 and 2030. This growth is mainly expected to come from rising demand in North America, where more data centres are getting built and expanded.
