SINGAPORE: Hon Hai Precision Industry Co, also known as Foxconn, saw a big jump in shares, the largest in three years. This surge comes after the company’s optimistic outlook for its AI hardware sales growth this year, The Edge Singapore reports.
During an earnings call on Thursday, Chairman Young Liu revealed that the company anticipates a 40% expansion in its artificial intelligence server business throughout the year. Hon Hai also aims to capture a 40% share of the overall market.
This bullish outlook has been further buoyed by the firm’s consecutive quarters of profit growth, which is attributed largely to AI hardware sales, which have compensated for sluggish demand for iPhones and consumer electronics.
Following this announcement, Hon Hai shares surged by up to 9.5% in Taipei on Friday, driven by optimism about AI demand.
Hon Hai, known to be a top assembler of Apple Inc.’s iPhones, initially missed out on the AI boom, but investors and analysts predict it will capture a larger market share. Recently, it made a major order with long-time US partner Hewlett Packard Enterprise Co.
Investors and analysts alike have become increasingly optimistic about Foxconn’s potential to capitalize on the growing demand for AI technology.
Despite not initially being prominent in the AI sector, Hon Hai recently reported that its acquisition of a major order from long-standing US partner Hewlett Packard Enterprise Co. has reinforced market confidence.
In its recent financial report, Hon Hai disclosed a 33% surge in net income to NT$53.2 billion (S$2.25 billion) for the quarter ending December, surpassing analyst estimates.
A substantial one-time gain bolstered this impressive performance. However, the company anticipates a decline in sales for the current period due to the elevated comparison base from the post-pandemic recovery period last year.
Despite challenges posed by a sluggish year for iPhone sales, Hon Hai has demonstrated resilience, with AI sales playing a pivotal role in enhancing profitability.
Bloomberg Intelligence analyst Robert Lea remarked on the positive trajectory:
“The business saw a good sequential rebound into Q4, partly driven by the AI-focused side, but if you take a step back and look at 2023 as a whole, it was a relatively weak year. The company should have a much better year as their main customers start to rebuild inventory.”
JPMorgan analysts have expressed optimism regarding Foxconn’s potential in AI server infrastructure, projecting a sustained rally from the second half of the year onwards. Estimates suggest that Hon Hai’s AI revenue and gross profit exposure could range between 10% and 12% by 2025.
However, the company faces persistent challenges, particularly with Apple accounting for over half its revenue. Recent reports on a 24% decline in iPhone sales in China during the first six weeks of the year highlight the uncertainties.
In response, Apple has initiated rare discounts on its web store, and online resellers are slashing prices by up to US$180 (SS$240.72) to stimulate demand. /TISG