AI Infrastructure Demand Fuels Hon Hai’s Revenue Growth
Hon Hai Precision Industry Co., the world’s largest maker of Apple Inc. iPhones, has reported a remarkable 15% revenue growth, surpassing expectations. This surge is largely attributed to sustained demand for AI infrastructure, particularly from tech giants like Alphabet Inc. and Microsoft Corp.
Server Assembly Partner to Nvidia Corp. Sees Significant Growth
The company, also known as Foxconn, reported NT$2.13 trillion ($64.6 billion) in revenue for the past three months, with December revenue rising by an impressive 42%. This growth has led to a boost in its shares, with an intraday gain of 3.6% in Taipei, the largest in about two weeks.
Taiwan AI Hardware Suppliers Benefit from Massive Spending
Hon Hai and other Taiwan-based AI hardware suppliers have been enjoying a significant boost from massive spending on servers for data centers by major US tech firms. This increased demand has led to a rise in revenue estimates for the company, with Goldman Sachs analysts revising up their 2024 earnings estimate by 1%.
Diversification Efforts Pay Off
Hon Hai’s cloud business, which includes AI servers, is expected to match sales from its iPhone-making division in 2025. This diversification effort is crucial for the company, as Apple’s iPhones have been experiencing muted growth. Apple has historically accounted for over half of Hon Hai’s sales.
Electric Vehicle Market Ambitions
In addition to its AI infrastructure growth, Hon Hai is also aiming to break into the electric vehicle market. Although this venture has yet to have a significant impact on its earnings, the company has reached out to Renault SA about a potential tie-up with Nissan Motor Co.
Near-Term Challenges Ahead
Despite the company’s impressive growth, Citi analyst Carrie Liu warns that the stock could experience near-term drag based on a first-quarter outlook that seems less than market estimates. However, with its strong performance in the AI infrastructure market, Hon Hai is well-positioned for long-term success.
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