How this Japanese toilet maker became an unlikely AI winner

By Hannah Pedone

Toto is 'aiming to achieve a toilet that never needs cleaning.' It's also supplying electrostatic chucks - a semiconductor-manufacturing component critical to the memory-chip boom.

Tokyo-traded shares of Japanese toilet maker Toto rose 18% on Friday.

On the surface, it may not seem like a premium toilet maker seeking "the perfect flush" has much to offer the artificial-intelligence supply chain. But it turns out that decades of ceramics experience can also lend themselves well to chip manufacturing.

The Japanese toilet maker Toto has a wide array of ceramics-related verticals: "variously designed bathrooms," public toilets, luxury tubs, and a purification technology that uses a process similar to photosynthesis to remove dirt from ceramic surfaces.

But increasingly, the company is applying its ceramics expertise to make electrostatic chucks, a chip-manufacturing component.

Enthusiasm around the electrostatic chuck - a ceramic plate roughly the size of a pizza, which uses an electrostatic force to hold semiconductors in place - helped send Toto's stock (JP:5332) (TOTDY) 18% higher on Friday in Japanese trading. That was the stock's largest one-day gain on record, according to Dow Jones Market Data.

On Thursday, Toto reported that its advanced ceramics business, which includes chip equipment components, grew 34% to 67.4 billion yen, or $429 million, in fiscal 2025. The advanced ceramics business also accounted for over 53% of the company's profits, which came out to -Yen53.8 billion, or $342.5 million, in the 2025 fiscal year.

Toto isn't new to the electrostatic-chuck game, with the Financial Times reporting that the company has been making them for over 40 years. But now the company is making a lot more of them, thanks to a surge in demand for the technology. The chip-equipment component is used for NAND flash memory chips, prices for which have soared due to a memory shortage.

Shares of Toto are up 48% so far this year.

Read more: A major Sandisk transformation is under way, and analysts say it could send the stock even higher

Baptista Research analyst Ishan Majumdar told MarketWatch that artificial intelligence has created a wide "investment halo" beyond simply graphics processing units, hyperscalers and semiconductor-equipment companies. He believes Toto is an extreme example of how investors have been looking beyond "first-order" AI beneficiaries and into the "second- and third-order supply chain." The consumer-facing toilet business is, of course, quite removed from the semiconductor sphere.

"Companies with highly specialized manufacturing capabilities, materials-science expertise or niche components used somewhere in the chip supply chain can suddenly be rerated by the market if those assets are viewed as capacity constrained, mission critical or difficult to replicate," Majumdar said, referring to the idea that shares of these businesses can come to fetch higher valuation multiples.

Yet Majumdar said that a key question for investors is whether the company's AI business is "large enough, profitable enough and capital-allocation-worthy enough to change the company's overall earnings profile, rather than simply creating a short-term thematic rally."

While Toto noted that the crisis in the Middle East has impacted sales for its bathroom business in Japan due to reduced production and increased procurement costs, that loss was offset by increased sales in its advanced ceramics business.

And if the electrostatic-chuck market loses steam, the company does have other big ambitions: It's currently "aiming to achieve a toilet that never needs cleaning."

See also: Nvidia is confronting a new challenge, even as AI spending keeps increasing

-Hannah Pedone

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-02-26 0917ET