Hitachi intends to train 50,000 people in generative AI and will invest hundreds of millions of dollars in both AI and green energy.
TakeAway Points:
- Hitachi intends to use collaborations with Nvidia, Microsoft, and Google to leverage hundreds of millions of dollars in investments in renewable energy and generative AI.
- With ¥1 trillion in cash and a $105 billion market valuation, the corporation is well-positioned financially, allowing for substantial acquisitions.
- Purchasing ABB’s power grid division and selling its share of a joint venture with Johnson Controls for air conditioning are examples of strategic actions.
Hitachi’s Investment Plans
Hitachi Ltd. is preparing to invest hundreds of millions of dollars in acquisitions, focusing on green energy and generative artificial intelligence. Chief Financial Officer Tomomi Kato emphasized the importance of careful vetting due to the high risks associated with these investments.
“These are extremely risky investments so we need to minimize the chances of failure,” Kato said.
The company has been strengthening its balance sheet and shedding non-core units, positioning itself for these new ventures.
Hitachi’s shares have tripled over the past two years, resulting in a market capitalization of ¥17 trillion ($105 billion). The company had about ¥1 trillion in cash and equivalents at the end of March, according to Bloomberg data. Hitachi has a history of significant investments in software, aiming to connect its products and systems to sensors and computing power through its Lumada software architecture. This approach allows customers to better monitor and manage the hardware they purchase from Hitachi.
In 2021, Hitachi acquired GlobalLogic Inc., a U.S. developer of outsourcing software, for $9.6 billion. The company is now ready to spend big to meet the growing demand for AI, having already formed partnerships with key players such as Nvidia Corp., Microsoft Corp., and Alphabet Inc.’s Google. Hitachi also plans to train more than 50,000 professionals in generative AI, with benefits expected to emerge as soon as this fiscal year, which ends in March.
Strategic Alliances and Energy capital investing
Hitachi has been proactive in forming strategic partnerships to bolster its AI capabilities. In May, the company announced a partnership with Google to form a new business unit aimed at improving AI adoption. In June, Hitachi entered a three-year agreement to integrate some of Microsoft’s cloud and AI services into its Lumada platform. These partnerships are expected to enhance Hitachi’s AI offerings and provide a competitive edge in the market.
On the energy front, Hitachi has made significant acquisitions to strengthen its position. The company recently bought the power grid unit of Zurich-based ABB Ltd., making it a top global provider of equipment for electricity networks. This move aligns with Hitachi’s focus on green energy and its commitment to becoming a leader in this sector.
Hitachi is also planning to sell its 40% stake in an air-conditioning joint venture with Johnson Controls International Plc. The deal could value the joint venture at almost ¥500 billion, according to sources familiar with the matter. Kato mentioned that Hitachi is considering various options with its partner but declined to elaborate.
“Revising our diverse portfolio is never-ending, so of course we have much left to do,” he said.
Market Reactions
The market has responded positively to Hitachi’s strategic moves and financial health. The company’s shares have seen significant growth, reflecting investor confidence in its future prospects. The focus on AI and green energy aligns with global trends, making Hitachi a compelling investment option for those looking to capitalize on these sectors.
Christopher Carey, a portfolio manager at Carnegie Investment Counsel, highlighted the long-term potential of AI investments.
“I still believe that we are in the very early innings of an AI revolution in terms of the way we live and work,” Carey said.
He noted that companies like Nvidia, Amazon, Microsoft, Broadcom, and Alphabet’s Google already have a strong lead in the AI space. Carey also pointed out the importance of the power sector in supporting AI infrastructure, mentioning companies like Eaton and Powell Industries as beneficiaries of increased demand for electrical grid upgrades.
