Sanken Electric Co., Ltd.

Japanese companies are performing well in the Indxx Climate Change Index, which is composed of stocks that contribute to global warming countermeasures. Four of the top 10 gainers year-to-date are Japanese companies, with battery maker GS Yuasa up 41%, water treatment company Kurita Water Industries up 26%, and waste incinerator and water treatment firm Takuma and power semiconductor maker Sanken Electric both up 23%, far outpacing the index's 5% gain. During the same period, the Tokyo Stock Price Index (TOPIX) rose 23%. The generative AI boom has led to the development of large-scale data centers, which increases power consumption and heat generation, drawing investor attention to cutting-edge semiconductor manufacturing, energy storage, and cooling technologies. Oscar Young of Impax Asset Management, which specializes in sustainable investment, noted that if large-scale semiconductor plant investment continues in Japan, the beneficiaries would be semiconductor materials and manufacturing equipment makers, water treatment, and power management companies. According to Ministry of Internal Affairs and Communications data, ICT sector power demand in 2040 is expected to be up to 27 times that of 2020, highlighting the growing importance of energy efficiency and cooling. Kioxia Holdings will invest 5 trillion yen in Japan over the next six years with U.S. partner SanDisk, and South Korea's SK Hynix is also considering building a plant in Japan. A Japan Development Bank survey shows that major companies' domestic capital investment plans for fiscal 2026 are expected to rise 19.7%. Meanwhile, caution is emerging, with New York State halting new data center development for one year. The Nikkei semiconductor stock index has plunged 27% this quarter, but Tiemo Lang of Polar Capital believes the acceleration trend in AI investment will continue and that the correction is unlikely to cloud the outlook for environmental infrastructure companies.