Hey everyone, Hirokichi here. Behind the scenes of every convenient generative AI service like ChatGPT, there’s actually a massive construction boom happening around the world: “data centers.” Today I want to explain why data centers have become such a big deal, and introduce eight notable listed companies from Japan and the U.S. that are tied to this trend.
Why Data Centers Have Become Such a Big Deal
A data center is a facility that houses large numbers of servers (computers) to run cloud services and process AI computations. The so-called “Magnificent Seven” — Google, Microsoft, Amazon and other U.S. tech giants — are expected to spend $527 billion (over 80 trillion yen) on AI and data center capital expenditures in fiscal 2026 alone, which is $62 billion above prior estimates. In Japan too, the government is encouraging domestic data center construction as a matter of economic security, and the market is expanding rapidly.
As this chart shows, according to Japan’s Ministry of Internal Affairs and Communications (“Information and Communications White Paper, FY2024 edition,” citing IDC Japan), the domestic data center services market is set to nearly double over five years, from 2.09 trillion yen in 2022 to 4.19 trillion yen in 2027. Given rising AI demand, I think this growth pace could accelerate even further.
Three Investment Themes Behind the Data Center Boom
“Data center stocks” cover a wide range of businesses. I like to think of them in terms of three broad themes.
The first is semiconductors — the “brain” of the operation. AI computation depends on GPUs (graphics processing units, chips originally built for graphics that are now essential for AI workloads). The second is power and cooling — the “heat and electricity” side of things. Servers packed tightly with GPUs generate enormous heat, so cooling technology and stable power supply are critical to the business. The third is communications infrastructure — the “data highway.” Optical fiber and networking equipment are essential for moving massive amounts of data between data centers and users. On top of that, there’s also the angle of real estate investment trusts (REITs) that own data center buildings and lease them out to companies.
Japan: 4 Notable Data Center Stocks
Let’s start with four Japanese listed companies Hirokichi has his eye on.
Sakura Internet (3778)
Sakura Internet runs cloud services and data centers in Japan. In fiscal 2026 (ended March), sales rose 12.4% year over year to 35.301 billion yen, but the company posted an operating loss of 403 million yen due to higher personnel investment and depreciation costs. It expects a recovery next fiscal year, with sales up 27.5% to 45 billion yen and operating profit of 1.5 billion yen. Backed by roughly 56.5 billion yen in subsidies from Japan’s Ministry of Economy, Trade and Industry, the company plans to invest around 100 billion yen by 2028 to build out 10,000 GPUs, and it already operates a 100%-renewable-energy AI data center. In April 2026, its stock jumped 53.4% in a single day on news of a partnership with Microsoft, hitting a year-to-date high of 4,025 yen, before pulling back to the 2,900 yen range by early June — a good example of how volatile this stock can be.
Fujikura (5803)
Fujikura is a wire and cable maker that manufactures optical fiber for data centers. Riding the wave of demand from generative AI, it posted sales of 1.1824 trillion yen (up 20.7% year over year) and operating profit of 188.7 billion yen (up 39.2%) for fiscal 2026. Operating profit in its telecommunications segment reached 15.27 billion yen, 1.7 times the prior year, now accounting for more than 80% of total operating profit. Its market cap crossed 10 trillion yen on a closing-price basis for the first time in April 2026, and the stock (post-split) hit an all-time high of 7,933 yen in May. The company also plans to invest up to 260 billion yen in the U.S. to expand optical fiber production.
Taikisha (1969)
Taikisha specializes in air-conditioning and cooling systems for data centers, offering a service called “Green Air IDC” that efficiently handles the enormous heat generated by AI servers. In fiscal 2026, sales rose 11.1% to 423.9 billion yen and operating profit jumped 47.3% to 47.7 billion yen, both record highs, with an operating margin of 11.3% that far outpaces its peers.
NEC (6701)
NEC is a major IT services company covering power, cooling, networking and security for AI data centers. In fiscal 2026, it posted revenue of 3.5827 trillion yen (up 4.7%) and operating profit of 359.9 billion yen (up 40.3%), both record highs. The spread of generative AI and the resulting boom in AI data center construction have been tailwinds for both its earnings and its stock valuation.
U.S.: 4 Notable Data Center Stocks
Now let’s look at four U.S. listed companies.
NVIDIA (NVDA)
NVIDIA holds an overwhelming share of the market for data center GPUs. For fiscal year 2026 (ended January 2026), annual revenue hit $215.9 billion, up 65% year over year, with data center revenue of $194 billion — 13 times what it was in fiscal 2023. Momentum continued into the first quarter of fiscal 2027 (ended April 2026), with revenue of $81.6 billion (up 85%) and data center revenue of $75.2 billion (up 92%), both record levels.
Broadcom (AVGO)
Broadcom holds a leading share of the market for data center networking switch chips (ASICs). Its “Tomahawk 6” switching chip connects servers together inside massive AI data centers, and the company is also developing custom AI chips in collaboration with OpenAI. As of July 2026, its stock traded around $370, with a market cap of about $1.76 trillion.
Vertiv (VRT)
Vertiv makes power and cooling equipment for data centers. Roughly 80% of its sales are tied to data centers, and it has particular strength in liquid cooling technology for high-density AI servers. In the first quarter of 2026, sales came in strong at $2.65 billion (up 30.1% year over year), and its order backlog reached roughly $15 billion (more than double the prior year). The stock has climbed roughly 86% to 90% year to date in 2026.
Digital Realty Trust (DLR)
Digital Realty Trust is a real estate investment trust (REIT) focused on data centers. It operates over 300 facilities across more than 55 countries and regions worldwide, leasing server space, power and cooling to companies and cloud providers. As of July 2026, its stock traded in the $176 to $180 range, with a dividend yield of around 2.7%.
Risks and Things to Keep in Mind Before You Invest
All the stocks introduced here look attractive, but I think it’s important to be aware of how volatile they can be. Sakura Internet, for instance, jumped more than 50% in a single day on partnership news, only to fall nearly 30% within about a month. Fujikura even hit its daily limit-down on the very day it reported record profits — a reminder that strong earnings don’t automatically translate into a higher stock price.
There’s also the point that expanding AI data centers requires enormous amounts of electricity, and some observers warn that power infrastructure constraints could become a wall to future growth. Many of these stocks have already risen sharply, and there are voices flagging rich valuations or even an “AI investment bubble.” Rather than concentrating your money in a single stock, I think it makes sense to diversify and take a wait-and-see approach, adding gradually over time.
Looking ahead, here are three things I think are worth watching: (1) how reliably each company can secure the power and land it needs, (2) whether subsidies and support programs from the Japanese and U.S. governments continue, and (3) staying mindful that stock prices around earnings season tend to swing wildly, so it pays not to get swept up in short-term, expectation-driven moves.
Let’s keep at it, slow and steady. See you next time!
I’ve also previously written about “Physical AI,” a closely related topic, so if you’re interested, please check that article out too. → [Explainer] What Is the “Physical AI” NVIDIA Expects From Japan? Key Japanese Listed Companies to Watch
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* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.
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