Nvidia-Partner Hon Hai’s Shares Climb After AI Spurs Sales Beat
(Bloomberg) — Hon Hai Precision Industry Co. reported a faster-than-expected 15% rise in revenue after Nvidia Corp.’s server assembly partner lifted steady demand for AI infrastructure.
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Hon Hai, which is also Apple Inc. The world’s largest iPhone maker reported revenue of NT$2.13 trillion ($64.6 billion) in December, helping the company known as Foxconn beat analysts’ expectations a “significant” rise in sales for the first quarter, helping its shares rise as much as 3.6% in Taipei, their biggest intraday gain in nearly two weeks.
The company and other Taiwanese AI hardware providers are benefiting from huge spending on data center servers by major U.S. tech companies such as Alphabet Inc. and Microsoft Corp. But so far, the lack of a compelling use case for AI makes investors nervous that expansion may slow.
Analysts at Goldman Sachs revised their 2024 earnings estimate up 1% based on higher-than-expected revenue in December.They also raised revenue estimates for this year and the next two years, citing higher AI server revenue.
“Sequential growth in cloud revenue supports our positive view of growth in shipments of next-generation rack-level AI servers and recovery in demand for shared servers and networking equipment,” Goldman Sachs analysts wrote.
Hon Hai expects revenue from its cloud business, which includes artificial intelligence servers, to match sales of its iPhone unit in 2025.
However, Citi analyst Kerry Liu warned in a note that the stock could take a short-term drag based on the company’s first-quarter guidance, which appeared to come in short of market estimates.
The AI market is important to Hon Hai’s efforts to diversify away from Apple, whose iPhones are on the rise.Apple has historically accounted for more than half of the Taiwanese company’s sales.
Hon Hai is also aiming to break into the electric car market, although that venture has yet to make a significant impact on its earnings.The company has approached Renault SA about a tie-up with Nissan Motor Co., which owns 36% of Renault For now, that pursuit is on hold as Nissan and Honda Motor Co. are in merger talks, Bloomberg News reported.
(Updates with stock moves and analyst comments)
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