Cherry Blossom Internet splurges 30 billion to increase AI computing power! Japanese cloud giant accelerates expansion of production capacity.

The head of Japan's Sakura Internet Company said that the company may need to increase its capital expenditure to nearly seven times the initial plan in order to keep up with the demand for artificial intelligence (AI) in Japan. The company's founder and CEO, Kunihisa Tanaka, stated that the data center operator is considering allocating as much as 20 to 30 billion Japanese yen (approximately 125 to 190 million USD) in the current fiscal year. This figure is higher than the company's previously announced official capital expenditure plan of 4.4 billion Japanese yen based in Osaka last month. The 48-year-old Tanaka said in an interview, "The utilization rate of AI servers has reached 80% to 90%," "We need to significantly increase capacity because the number of orders is increasing rapidly." Sakura Internet had previously stated that they are considering an additional 6.5 billion Japanese yen in capital expenditure as well as additional expenses for purchasing AI accelerators. These remarks indicate the speed of data center construction in a country eager to catch up in the field of AI, despite the increasing risks faced by its power grid. It also reflects the rising cost of data center construction in a country grappling with long-term labor shortages and rising material costs. Countries, including Japan, believe that the ability to control chips, data centers, and AI models in a landscape dominated by US and Chinese technology is directly related to national resilience. This is driving investments globally and boosting the profits of operators like Sakura Internet. Sakura Internet plans to invest 113 billion Japanese yen in Nvidia GPUs and other AI hardware between the fiscal years 2023 and 2030, of which approximately half has already been spent. The Japanese government has pledged to provide subsidies totaling up to 57.5 billion Japanese yen to cover about half of Sakura Internet's expenditures on data centers. In March of this year, Sakura Internet received approval from the Japanese government and municipal agencies to use its cloud services. It is the only local data center operator to receive this certification, with only Amazon, Google under Alphabet, Microsoft, and Oracle having received it before. Tanaka said that this has completely changed the company's prospects. He stated that more and more companies are seeking to ensure that data remains domestic, aiming to enhance their ability to track all data flows in the event of network attacks or other incidents. Fearing that foreign governments or companies may shut down supporting intelligent systems behind power grids, hospitals, or financial systems, governments around the world are increasingly supporting local businesses. Sakura Internet is currently in negotiations with potential clients in Thailand to provide data center services free from the influence of the United States and China. Tanaka stated that due to Japan's suppliers having a reputation for price stability and reliability regardless of geopolitical developments, there is a high level of interest in them. Sakura Internet's stock price has remained virtually unchanged from a year ago, underperforming its peers in the global AI-driven stock market surge. Japan's long-standing labor shortage and continuously rising material costs are pushing up the construction costs of data centers. Despite achieving a historic high in operating income in the fiscal year ending in March, Sakura Internet reported an operating loss of 403 million Japanese yen. The company predicts a profit of 1.5 billion Japanese yen in the current fiscal year, while analysts expect 2.9 billion Japanese yen. Sakura Internet's stock performance has lagged behind the Nikkei 225 index. Kunihisa Tanaka stated that Sakura Internet is preparing for a future where most services will be accessed by AI rather than humans. He said, like the internet, AI will soon become a matter of course. He pointed out that the proportion of machines in website traffic is increasing. "I am amazed at what AI can do. Tasks that used to take me three to four days to complete can now be done in three to five minutes, and in the meantime I can do something else," he said. "It's a completely different world."