Hon Hai's AI Ambitions Drive Record Profits and Stock Surge Amid Global Market Uncertainty
1min read Foxconn's parent company, Hon Hai Precision Industry Co., has reported its fifth consecutive quarter of rising profits, driven significantly by a surge in demand for AI servers. For the third quarter of 2024, the company posted a net profit of 493 billion New Taiwan dollars (approximately 15.2 billion USD), marking a 14% increase from the same period last year. This exceeds analysts' projections of 460.9 billion New Taiwan dollars, reflecting the growing influence of artificial intelligence on the company’s bottom line.
Hon Hai forecasts robust growth in its AI server segment for the coming year, anticipating that it will constitute as much as 50% of the company’s total server revenue by 2025. The firm has maintained its outlook for substantial sales growth in 2024, banking on the burgeoning demand for AI technology across various sectors. The company registered a 20% year-on-year revenue increase for the third quarter, amounting to 1.855 trillion New Taiwan dollars, setting a new quarterly revenue record.
In a strategic move to bolster its AI capabilities, Hon Hai is constructing what is expected to be the world's largest manufacturing facility in Mexico, to assemble NVIDIA's GB200 superchips. These chips form the crux of NVIDIA's next-generation Blackwell computing platform, underscoring Hon Hai’s pivotal role in the AI supply chain.
As the largest assembler of iPhones globally, Hon Hai’s fortunes are closely tied to Apple, contributing around 40% of its revenue in the second quarter from consumer electronics, including iPhones. Nevertheless, the company is actively diversifying its business lines and is increasingly significant in supplying AI servers for tech giants like Amazon and NVIDIA. This diversification is evident as cloud and network operations, including AI servers, accounted for 32% of the company's total revenue in the third quarter, ranking as its second-largest income stream after consumer electronics.
Despite concerns over a potential slowdown in the US economy, which caused a more than 10% drop in its stock in the global markets, Hon Hai's overall stock value has doubled year-to-date, far outpacing the broader market. This considerable stock gain reflects investors' confidence in Hon Hai's strategic emphasis on AI innovation and its expanding role in next-generation technologies.