A $40 billion selloff in a 141-year-old Japanese cable firm has served as a reality check on the fragility of the global artificial intelligence-driven stock rally.
Optical fiber cable maker Fujikura almost halved in value in the week through May 20 as investors rushed to dump its stock following a disappointing earnings forecast and lackluster medium-term plan. While the shares have since recouped some of those losses, they’re still trading almost 30% below their all-time closing high hit on May 13.
Fujikura’s roller-coaster week reveals how quickly the tides can turn for AI stock winners as investors realize hopes for explosive growth in infrastructure may have run far ahead of manufacturers’ ability to deliver.
“The fact that Fujikura hasn’t been able to sufficiently expand capacity has created a gap between market expectations and reality,” said Norikazu Shimizu, an analyst at Iwai Cosmo Securities. “Even if they want to produce more, they just can’t fully meet demand.”
The company, which supplies fiber optic cables used to connect servers and switches inside AI data centers, has been one of Japan’s hottest trades over the past two years amid surging demand for generative AI models. Fujikura is part of what’s known as the Portsmouth consortium tasked with building out data center infrastructure in the U.S. Its share price had ballooned more than 1,500% in the 24 months through mid-May.
But the market is increasingly questioning whether Fujikura can expand production quickly enough to justify its lofty valuation. In a mid-term plan released May 19, the company forecast operating income of ¥315 billion ($2 billion) in the fiscal year starting April 2028, well below the average analyst estimate of ¥455 billion. President Naoki Okada has said the firm’s production capacity will remain insufficient even after a new plant in Chiba Prefecture comes online.
The selloff has reverberated beyond Fujikura as investors reassess the feasibility of the AI infrastructure boom. Concerns are growing that some data center projects are facing delays due to material bottlenecks and supply chain constraints. Stocks of fellow cable makers Furukawa Electric and Sumitomo Electric Industries have also underperformed Japan’s Nikkei benchmark since May 13.
“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,” said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors.
The episode is also exposing broader concerns about the durability of AI-linked valuations. Fujikura shares continue to trade at more than 40 times forward earnings, far above the Topix index’s roughly 18 times, even after their rout. Before its earnings release, the stock’s relative strength index was close to 80, indicating it was overbought, according to data.
Material shortages are adding to the pressure. Fujikura has flagged concerns over the supply of hydrogen and helium, with the latter exacerbated by the Iran war.
There are also longer-term risks emerging for the cable demand story. Rapid advances in transceiver technology are expected to reduce the amount of cabling needed inside future data centers. That’s “definitely a risk,” but likely still several years away from materially hurting demand, according to Pelham Smithers Associates analyst William Nestuk.
For now, the demand outlook for cables remains strong. CRU Group forecasts global demand for data center cables will grow 22.4% between 2024 and 2030, driven largely by North America.
Cable makers also retain significant pricing power because their hyperscaler customers can absorb higher costs quickly. Apple is among Fujikura’s biggest clients, accounting for around 4% of its revenue, according to data. That strength means there’s scope for a decent rebound in Fujikura’s shares although they are unlikely to return to pre-earnings levels, Nestuk said.
Still, Fujikura’s fall from grace suggests AI infrastructure stocks’ days as investor darlings may be numbered. “Investors are looking to reduce exposure to the sky-high valuations of AI data center and bottleneck plays,” said Nestuk.
Originally written by: Alice French
Image credit: BLOOMBERG
Source: The Japan Times
Published on: 26 May 2026
Link to original article: Japan cable maker rout exposes cracks in AI infrastructure rally
