Foxconn’s AI Server Surge: Navigating Trade Winds to Capture the Infrastructure Boom

Philip CarterWednesday, May 14, 2025 5:30 pm ET
14min read

Foxconn’s Q1 2025 profit soared 91% to NT$42.12 billion, propelled by a 50%+ year-on-year surge in AI server revenue. The company’s dominance in NVIDIA’s supply chain positions it as a linchpin of the AI infrastructure boom—but its trajectory hinges on navigating trade policy risks and currency headwinds. For investors, this is a high-reward opportunity to buy the dips, provided they hedge strategically.

The AI Infrastructure Play: Why Foxconn is a Must-Hold
Foxconn’s partnership with

NVIDIA
is no mere supplier relationship—it’s a strategic alliance to dominate the $500 billion U.S. AI infrastructure market. As the sole assembler of NVIDIA’s Blackwell-powered GB200 servers (priced at $30k–$40k each), Foxconn is at the heart of hyperscalers’ AI spending. Q1’s record revenue of NT$1.64 trillion (up 24.2%) underscores this: AI servers now command over 50% of server sales and are set to nearly double again in Q2.

The data is unequivocal:

While TSMC’s chip foundry dominance is undeniable, Foxconn’s AI server growth offers a leverage play on the AI adoption curve—a sector growing at 24.5% annually. At 10.5x 2025 earnings estimates, it trades at a 30% discount to TSMC’s valuation, despite its critical role in NVIDIA’s AI roadmap.

The Risks: Tariffs, Currency, and Geopolitical Whiplash
Yet, Foxconn isn’t without vulnerabilities. Three threats loom large:

  1. Trade Policy Volatility: U.S. tariffs on Chinese-made goods (54%) and Vietnamese components (46%) force Foxconn to shift production to Mexico—a strategy now under threat as U.S. lawmakers eye extending tariffs to Mexican imports. The company’s stock has already fallen 11.4% YTD due to these fears.
  2. Currency Headwinds: A 3% annual revenue drag occurs for every 1% appreciation of the Taiwan dollar. With the NT$ up 8% YTD, this translates to ~24% revenue erosion—a key factor behind Foxconn’s 2025 guidance downgrade.
  3. Supply Chain Complexity: Scaling Mexico’s Guadalajara plant (targeting 20,000 servers annually) requires flawless execution. Delays here could cede ground to rivals like TSMC’s U.S. fabs or Intel’s AI chip ambitions.

Contradiction or Catalyst? The Near-Term vs. Long-Term Split
Foxconn’s Q1 guidance cut—revising “strong growth” to “significant growth”—has spooked short-term traders. Yet, this is a calculated move: the company is prioritizing margin stability over revenue growth in a volatile environment. Meanwhile, Q2 earnings (due in July) are expected to show “high double-digit AI server growth,” a near-term catalyst to watch.

The contradiction here is opportunity:
- Bulls argue that AI demand is structural. Hyperscalers like Microsoft and Amazon are doubling down on generative AI, while governments race to build AI “factories” (data centers optimized for training LLMs).
- Bears focus on the 54% of revenue still tied to non-AI products (e.g., consumer electronics), which face margin pressure from tariffs.

Investment Thesis: Buy the Dip, Hedge the Risks
For investors with a 12–18 month horizon, Foxconn’s AI server dominance is a once-in-a-decade leveraged play on the AI infrastructure boom. Here’s how to capitalize:

  1. Entry Point: Target a 10% pullback from current levels (NT$45). The stock’s NT$60+ upside (projected by analysts) implies a 33% return by mid-2026 if AI adoption accelerates.
  2. Hedge Tariffs: Use put options on Foxconn shares or invest in regional peers like Hon Hai Precision (which services Foxconn’s EV division).
  3. Hedge Currency: Pair long positions with USD/NT$ currency forwards to offset Taiwan dollar appreciation.

The Bottom Line
Foxconn’s AI server growth is real—and its Mexico-U.S. manufacturing pivot is a masterstroke. While trade wars and currency swings will create volatility, the long-term tailwind of AI’s $500 billion U.S. infrastructure build-out is undeniable. For investors willing to stomach near-term noise, this is a buy signal: the AI boom isn’t slowing—it’s just getting started.

The numbers tell the story: Foxconn isn’t just riding the AI wave—it’s building the boat.