4/13/2026
Is MSG Maker Ajinomoto Sitting on an AI Goldmine? This Investor Thinks So
Wall Street Journal (04/13/26) Jie, Yang
Palliser Capital has built a stake in a Japanese company it says has a lucrative monopoly on a material vital to artificial-intelligence infrastructure. The unlikely company: Ajinomoto (TYO: 2802), best-known for making the flavor enhancer MSG. Palliser Capital says Ajinomoto has the leverage to extract a lot more money from customers but isn’t raising prices meaningfully—a restraint that in its view, is a missed opportunity. Ajinomoto is one of several Japanese companies thrust into the spotlight by the AI gold rush. Toto (5332.T), a company famous for toilets, is also on investors’ radars thanks to specialized ceramic materials it produces that are used in advanced chip making. Both have caught the eye of U.K.-based Palliser, which has built stakes in the two companies, and described them as overlooked and undervalued. Ajinomoto, which means “essence of flavor,” built its food empire on the discovery of umami and commercialized the so-called fifth taste in its purest form as monosodium glutamate, a “flavor bomb” used by cooks worldwide. But it also has a functional-materials business that houses the product catching investors’ interest: Ajinomoto Build-up Film (ABF), a specialized insulating material used to form the tiny layers known as substrates, which link chips to devices by carrying thousands of signals. Without ABF substrates, many of the world’s most advanced chips cannot be produced. Given that, Palliser, one of Ajinomoto’s top 25 shareholders, is lobbying the company to maximize the value of what it called the “most under-monetized AI infrastructure monopoly.” It has proposed that the MSG producer increase ABF pricing by over 30%, noting that it trades significant valuation discount to its ABF substrate customers. Palliser said a price hike shouldn’t hit customers’ wallets too much, since ABF accounts for less than 0.1% of a graphic processing unit’s sale price. Ajinomoto said it takes feedback and proposals from investors very seriously, and remains committed to using those insights to generate further sustainable growth in enterprise value. Shares of the MSG maker have fared well so far this year. The stock surged in February after better-than-expected earnings and upbeat profit guidance, and is up over 40% year to date. Ajinomoto’s dominance in the ABF niche gives it influence over the semiconductor supply chain, where only a handful of companies can turn the material into the ultra-dense substrates required by Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA) and other major tech firms. But many traditional Japanese manufacturers have historically raised prices only during a supply crunch or cost squeeze. Nittobo (TYO: 3110), a Japanese textile company that produces critical materials for AI hardware, is raising prices for its T-glass fabric amid material shortages and surging production costs. Ajinomoto’s using its leverage to hike prices when supply is stable could damage customer relationships, a risk it doesn’t seem inclined to take, analysts said. ABF prices have remained stable as there haven’t been severe shortages recently, said Shih Fang Chiu, a senior researcher at the Taiwan Institute of Economic Research. “We have steadily expanded our business by co-creating value with our customers,” Ajinomoto said. But as demand for advanced AI chips picks up, the ABF supply balance may be shifting. Ajinomoto said it has started ramping up ABF capacity, and is planning additional expansions to meet rising demand. As AI chips grow larger and more complex, demand for the substrates that connect them to devices is soaring. Industry forecasts show the supply-demand gap widening sharply through 2028. Major substrate manufacturers have said AI-related production lines are at or near full capacity, and they expect industry capacity to fall well short of demand by 2027. If substrate makers begin consuming ABF faster than Ajinomoto can make it, the company will inevitably be forced to raise prices, said Jukan Choe, an analyst with Citrini Research. “Ajinomoto needs to better balance between maintaining its reputation as a stable, long-term supplier, and recognizing that demand for ABF is rising far faster than supply,” he said.
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