Hon Hai Surges with AI Drive: Profits Soar as Demand for Nvidia-Powered Servers Boosts Growth

Word on the StreetThursday, Nov 14, 2024 8:00 am ET

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Foxconn's parent company, Hon Hai Precision Industry Co., reported a net profit of TWD 493 billion (approximately $15 billion) for the third quarter, marking a 14% increase year-on-year. This result exceeded analysts' expectations and marked the fifth consecutive quarter of profit growth, driven largely by robust demand in the AI server market.

During the third-quarter earnings call, Hon Hai's Chairman, Liu Young-way, emphasized the anticipated growth of AI servers. The company projects that AI servers will account for half of its total server revenue by next year, reflecting a significant shift towards servicing AI-driven technologies. The broader impact of this transition is expected to manifest in 2025, designated as the "Year of AI Intelligence" by the company.

The third quarter's revenues climbed by 20% to a record TWD 1.85 trillion, buoyed by orders for servers featuring cutting-edge Nvidia chips. Looking forward, Hon Hai maintains an optimistic outlook for substantial sales growth in 2024 and anticipates continued year-on-year revenue increases in the fourth quarter.

In addition to its existing growth areas, Hon Hai is expanding its manufacturing capabilities to support Nvidia's new generation of GB200 "super chips" in Mexico, aligning its production footprint with emerging technological needs. This plant is set to become the largest of its kind globally, positioning Hon Hai at the forefront of advanced chip assembly.

Hon Hai's diversification strategy has also seen it increase involvement with leading tech companies like Amazon and Nvidia, especially in AI server production, which now constitutes the second-largest segment of its operations after consumer electronics. This shift underscores Hon Hai's role as a crucial player in the burgeoning AI infrastructure landscape.

Despite concerns over a potential economic slowdown in the U.S. impacting market sentiment, Hon Hai's stock performance has been resilient, doubling in value year-to-date, outpacing the broader market. This reflects strong investor confidence in its strategic positioning and future growth potential in emerging technologies.

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