A recent sharp drop in the stock price of Nittobo, a leading Japanese materials company, has been dubbed a 'black swan' event for the AI supply chain.
But this wasn't a sudden, unpredictable crisis. Instead, it was the result of a narrative shift in the market, driven by three overlapping factors. For months, the story was simple: the AI boom required more powerful servers, which in turn needed advanced materials like high-performance fiberglass cloth. Nittobo, as a near-monopolist in this area, saw its stock soar on the back of this 'scarcity' narrative.
So, what changed? The causal chain is quite clear. First, the backdrop was the relentless upgrade cycle of AI servers, moving from 800G to 1.6T speeds. This technology leap requires more complex and higher-quality printed circuit boards, and thus more of the special low-loss fiberglass cloth that Nittobo produces. This created a genuine supply bottleneck, allowing Nittobo and other suppliers to raise prices and enjoy high valuations.
Second, a major new variable emerged from China. Companies like China Jushi announced massive expansions of their production capacity for high-end, electronic-grade fiberglass cloth. These weren't just plans; new production lines began to come online. This sent a clear signal to the market: the era of absolute scarcity was coming to an end. The supply, while still tight today, would likely loosen significantly by 2027 or 2028.
Third, rising raw material costs, particularly copper (a key component of Copper Clad Laminates, or CCLs), added another layer of pressure. While higher costs initially justified price hikes, they also made downstream customers more sensitive to the risk of a future supply glut. They became more resistant to further price increases, anticipating that the new Chinese capacity would eventually lead to price cuts.
This confluence of events forced investors to re-evaluate. The narrative shifted from 'permanent scarcity,' where Nittobo could command high prices indefinitely, to 'temporary scarcity' that would be diluted over time. This change was enough to erase the 'certainty premium' baked into Nittobo's stock price, leading to a significant correction, even though the company's current earnings remain strong.
- Glossary
- Fiberglass Cloth: A woven fabric made from fine fibers of glass, used as a reinforcing agent in printed circuit boards for AI servers due to its excellent electrical insulation and stability.
- CCL (Copper Clad Laminate): A core material for printed circuit boards, consisting of fiberglass cloth impregnated with resin and clad with copper foil on one or both sides.
- Scarcity Premium: The extra value or higher price that a stock or asset commands due to a belief that its supply is limited and in high demand.