Foxconn’s AI Surge Outpaces Tariff Headwinds: A Buy at Current Levels?

Foxconn’s Q1 2025 earnings report delivered a thunderous 91% year-on-year net profit surge, fueled by surging demand for AI servers. Yet shares have dipped 11% year-to-date amid fears over U.S.-China trade tensions. This is a classic case of short-term noise obscuring long-term opportunity. Let’s dissect why Foxconn’s strategic pivot to AI and EVs positions it to capitalize on a structural tech boom, even as it navigates geopolitical storms.

The AI Server Gold Rush: A Profit Engine Ignites

Foxconn’s record Q1 revenue—up 24.2% YoY—was powered by its role as a key supplier of AI servers to Nvidia, the undisputed leader in AI hardware. The company now expects high double-digit AI server volume growth in Q2, with production ramping aggressively. This isn’t just a temporary blip; AI infrastructure spending is projected to hit $337 billion by 2026, driven by hyperscalers and enterprises racing to deploy large language models and generative AI tools.

Foxconn’s dominance here isn’t accidental. Its vertically integrated supply chain and manufacturing scale allow it to deliver custom-designed servers at scale—a capability no rival can match. Investors should note that AI server margins are 30-40% higher than traditional IT hardware, turbocharging profitability.

Navigating Tariff Tempests: Mexico, EVs, and the 90-Day Truce

The elephant in the room? U.S. tariffs. Foxconn’s Mexico plant—critical for AI server production—faces duties under Trump-era rules, while its China-based iPhone assembly remains vulnerable to trade wars. Yet two factors neutralize this risk:

1. Geographic Diversification:
   Foxconn’s Mexico expansion is a strategic masterstroke. While tariffs add costs, proximity to U.S. markets cuts shipping times and leverages lower labor costs. Meanwhile, its EV partnerships—like the Mitsubishi Motors electric vehicle deal—diversify revenue streams. A potential stake in Nissan could further cement its automotive foothold, reducing reliance on consumer electronics.

2. The 90-Day Tariff Truce:
   The U.S.-China agreement to suspend additional tariffs until late 2025 buys Foxconn critical breathing room. Even if tensions resurface, AI server demand is too urgent to halt. Hyperscalers will pay a premium to secure capacity, making Foxconn’s factories “too big to tariff.”

Why the Stock Dip is a Buying Opportunity

Foxconn’s shares have underperformed due to near-term tariff fears, but fundamentals scream contrarian value:
- Revenue visibility: AI server backlogs ensure strong Q2 results, with no sign of demand cooling.
- EV upside: Mitsubishi’s struggling sales in China/U.S. create an acquisition opportunity for Foxconn to gain market share in a $1.5 trillion industry.
- Valuation: At 9.5x trailing P/E, Foxconn trades at a discount to peers like Hon Hai Precision (its parent), despite higher growth prospects.

The Bottom Line: Buy the Dip, Own the AI Future

The bears focus on trade risks, but they’re ignoring two truths:
1. AI is not a fad—it’s a generational shift in computing demand.
2. Foxconn’s $1.39 billion Q1 net profit isn’t a fluke; it’s the start of a new earnings trajectory.

The 90-day tariff truce isn’t a panacea, but it’s a catalyst for investor confidence. Pair that with Foxconn’s aggressive moves into EVs and Mexico, and you’ve got a company primed to thrive in a fragmented world.

Action Item: Aggressively accumulate shares of Foxconn at current levels. The AI boom and EV diversification are too powerful to ignore—this is a once-in-a-decade opportunity to buy a manufacturing titan at a discount.

Investors: The path to profit is clear—act now before the AI rally lifts Foxconn’s valuation.