Increased Capital Expenditure

Sakura Internet Inc’s chief executive officer Kunihiro Tanaka announced that the company may need to raise its capital spending by nearly seven times its original plan to address the growing demand for artificial intelligence (AI) in Japan.

The Osaka-based data center operator is looking to allocate as much as ¥20 billion (RM498.23 million) to ¥30 billion this fiscal year, significantly higher than the ¥4.4 billion initially outlined in its capital expenditure plan announced last month.

Rising Demand for AI Infrastructure

"AI server usage rates are 80% to 90%," Tanaka stated in an interview.

He emphasized the necessity to expand capacity significantly due to a sharp increase in orders.

To support this expansion, Sakura Internet is considering an additional ¥6.5 billion in capital expenditure and plans to procure AI accelerators.

The urgency of this expansion highlights the rapid pace of data center development in Japan, which is striving to keep up with global advancements in AI technology.

This growth comes with challenges, including potential risks to the power grid and rising construction costs, exacerbated by chronic labor shortages in the country.

Market Response and Government Support

Following these announcements, shares of Sakura Internet surged by as much as 7.5% in early afternoon trading in Tokyo, marking the largest intraday gain in about a month.

The increasing focus on AI is part of a broader strategy among countries like Japan to enhance their technological resilience, particularly in the face of competition from US and Chinese tech giants.

Sakura Internet has already utilized approximately half of the ¥113 billion it plans to spend between fiscal 2023 and fiscal 2030 on AI hardware, including Nvidia Corp graphics processing units.

The Japanese government has pledged subsidies that could reach up to ¥57.5 billion, covering roughly half of Sakura Internet’s expenditures on data centers.

In March, Sakura Internet also received approval for the use of its cloud services by the Japanese government and municipal bodies, solidifying its position as a key player in the domestic data center market.