(May 25): Sakura Internet Inc’s chief said the company may need to hike its capital spending by nearly seven times its initial plan to keep up with artificial intelligence (AI) demand in Japan.
The data centre operator is eyeing an allocation of as much as ¥20 billion to ¥30 billion this fiscal year, founder and chief executive officer Kunihiro Tanaka said. That’s above the ¥4.4 billion in the Osaka-based company’s official capital expenditure plan announced last month.
“AI server usage rates are 80% to 90%,” Tanaka, 48, said in an interview. “We need to expand capacity significantly because the number of orders are increasing sharply.” Sakura Internet has said it’s considering a further ¥6.5 billion in capex and additional spending to procure AI accelerators.
The comments show the speed of the data centre buildout in a country eager to catch up in AI, even at growing risk to its power grid. It also reflects the rising cost of data centre construction in a country grappling with chronic labour shortages and climbing materials costs.
Shares of Sakura jumped as much as 7.5% early afternoon in Tokyo, their biggest intraday gain in around a month.
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Countries including Japan see the ability to control chips, data centres and AI models as directly related to national resilience in a landscape dominated by US and Chinese technology. That’s spurring investment around the globe and boosting earnings for operators like Sakura Internet.
Sakura Internet has already spent roughly half of the ¥113 billion it plans to use between fiscal 2023 and fiscal 2030 for AI hardware like Nvidia Corp graphics processing units. The Japanese government has pledged subsidies that may total as much as ¥57.5 billion to cover roughly half of Sakura Internet’s expenditures on data centres.
In March, Sakura Internet secured approval for the use of its cloud services by the Japanese government and municipal bodies. It’s the only home-grown data centre operator to win that designation, which has so far been given to Amazon.com Inc, Alphabet Inc’s Google, Microsoft Corp and Oracle Corp.
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That’s changed the company’s outlook drastically, Tanaka said. More companies seek to ensure data remains within the country’s borders, aiming to improve their ability to trace all data flows should a cyberattack or other incident occur, Tanaka said.
The fear that a foreign government or company could turn off the intelligence behind power grids, hospitals or financial systems is prompting countries around the world to shore up domestic ventures.
Sakura Internet is in talks with potential customers in Thailand about providing data centre services that are free from US and Chinese influence. Interest in Japanese providers is high thanks to a reputation for price stability and reliability regardless of geopolitical developments, Tanaka said.
Shares of Sakura are little changed from a year ago, underperforming peers in a global AI-fuelled rally. Chronic labour shortages and rising materials costs in Japan are heightening data centre construction costs.
For the year ended in March, Sakura Internet reported an operating loss of ¥403 million despite record revenue. The company forecasts a profit of ¥1.5 billion in the current fiscal year, compared with analyst expectations of ¥2.9 billion.
Sakura Internet is preparing for the day when most of its services will be accessed by AI instead of people, Tanaka said. Just like the internet, AI is about to become a given, he said, noting that machines are comprising a growing proportion of website traffic.
“I’m amazed by how much AI can do. Tasks that used to take me three or four days are now finished while I can do something else, and it’s done in three to five minutes,” he said. “It’s a different world.”
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