Japan’s largest toilet maker is being tipped as an AI stock, and activist investors are convinced that it is no flash in the pan.
UK-based activist Palliser Capital lifted the lid on the whole thing and told Toto’s board it is an “undervalued and overlooked” AI play, urging it to stop hiding its ceramics business behind the porcelain.
Palliser Capital said the advanced ceramics segment sits in the semiconductor supply chain and kicks out 40 per cent of Toto’s operating profit, which is hardly small change down the back of the cistern.
For those not in the know, Toto is famous for heated seats and its “Washlet” bidet, but Palliser said it “has quietly evolved from a traditional domestic sanitary ware champion into a rising powerhouse in advanced ceramics for semiconductor manufacturing”.
The fund called Toto “the most undervalued and overlooked AI memory beneficiary” because it makes electrostatic chucks used in producing Nand memory chips, the unglamorous bits that keep the whole AI loo roll spinning.
Memory chip prices have shot up in recent months thanks to AI demand, and Toto’s ceramic chuck tech stays stable at very low temperatures while gripping silicon wafers.
That puts it in the frame for cryogenic etching, which is expected to grow as memory chips become more layered and complex, with more engineering and less marketing spray.
Toto has been making electrostatic chucks since the 1980s, using ceramic know-how learnt on the bathroom beat, but only recently has the side business become profitable.
Palliser thinks Toto has a five-year competitive “moat” before rivals catch up, and reckons the ceramics unit could deliver 30 per cent or more revenue growth in the next two years “driven by Nand upgrade cycle and stable replacement demand”.
The activist also complained Toto is not explaining the business properly to shareholders, and that too little planned investment is flowing to the high-margin unit.
Palliser was founded by a former senior figure at Elliott Management and has become more visible in Japan’s booming activism scene, where investors are increasingly rattling the chain.
The fund bought into Toto about six months ago and now holds it in its top 20, according to people familiar with its position. It has stakes in Tokyo Tatemono, Keisei Electric Railway, and Japan Post Holdings.
Palliser said Toto shares could rise by more than 55 per cent if it expanded advanced ceramics, sold cross-shareholdings and used its ¥76bn ($496mn) net cash more efficiently (about €420mn at the 17 February 2026 ECB reference rate).
Toto shares are already flushed with success and are more than 60 per cent in the past year, including more than five per cent on Tuesday after Bloomberg first reported Palliser’s stake.
Goldman Sachs upgraded the stock to “buy” last month, pointing to expected high growth as global investment in AI data centres keeps running, and Toto is not alone in Japan’s weirdest tech reboot.
Ajinomoto, better known for soup stocks, now uses resin derived from its umami work to make insulation between chips and motherboards, proving the AI boom will happily rummage through any cupboard in the house.
