Shares of Hon Hai Precision Industry Co. surged in Taipei, Taiwan, marking their largest intraday increase in over three years. The company is anticipating robust growth in its artificial intelligence (AI) hardware sales for the current year. Chairman Young Liu announced that the Taiwanese company is eyeing a 40% expansion in its AI server business, aiming to capture a significant share in the overall market. This bullish outlook follows Hon Hai’s consecutive quarters of strong profit growth, driven by successful AI hardware sales that offset a decline in demand for iPhone and consumer electronics.
Investor enthusiasm for Foxconn, also known as Hon Hai, has been steadily growing this year, propelling shares up by as much as 9.5% in Taipei. The company, a key assembler of Apple Inc.’s iPhones, appeared to have missed out on the initial AI boom, but analysts and investors now see it as having the potential to capitalize on the increasing demand for AI technology. Recent reports indicate that Hon Hai secured a substantial order from long-time US partner Hewlett Packard Enterprise Co.
Following a 33% surge in net income to NT$53.2 billion ($1.7 billion) in the quarter ending December, major financial institutions such as Morgan Stanley, Citigroup Inc., and UBS Group AG raised their price targets for Hon Hai. Analysts at Citigroup highlighted the company’s competitive edge in offering comprehensive solutions, including liquid cooling and switches, which positions it favorably for securing more projects.
Despite an anticipated decline in sales for the current period, Hon Hai remains optimistic about its future prospects. The company’s reliance on AI sales has proven beneficial during a challenging year for the iPhone, its flagship product. Bloomberg Intelligence analyst Robert Lea noted that while 2023 was a relatively weak year overall, Hon Hai is expected to experience a significant improvement as its primary clients begin rebuilding inventory.
Market experts, including those at JPMorgan, foresee Hon Hai’s momentum continuing as the market increasingly bets on its success in AI server infrastructure in the latter part of the year. However, challenges persist as Apple continues to account for over half of Hon Hai’s revenue, amidst reports of declining iPhone sales in China. To stimulate demand, Apple has resorted to offering discounts, with online resellers following suit by slashing prices to attract buyers.
The road ahead for Hon Hai remains a combination of promise and obstacles, with the company poised to navigate through a landscape defined by evolving consumer preferences and technological trends. As the global market for AI continues to expand, Hon Hai’s strategic positioning and commitment to innovation will play a vital role in shaping its trajectory in the coming years.