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Foxconn Forecasts Strong Growth for AI Hardware Sales

(Bloomberg) — Hon Hai Precision Industry Co. shares witnessed their largest intraday surge in over three years following the company’s optimistic forecast for its AI hardware sales this year. With AI server business expected to grow by 40% and aiming for a 40% market share, Chairman Young Liu expressed confidence during an earnings call on Thursday. Foxconn, also known as Hon Hai, reported impressive profit growth driven by lucrative AI hardware sales, which helped offset the weak demand for iPhones and consumer electronics.

The company’s shares soared by up to 9.5% in Taipei on Friday, extending a rally that began at the start of the year. The increasing optimism surrounding Foxconn’s potential to capitalize on AI demand have attracted investors’ attention, especially after securing a significant order from long-time US partner Hewlett Packard Enterprise Co. Moreover, major financial institutions such as Morgan Stanley, Citigroup Inc., and UBS Group AG have raised their price targets for Hon Hai following a 33% increase in net income to NT$53.2 billion ($1.7 billion) in the last quarter of December.

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Despite the positive developments, Hon Hai anticipates a decline in sales for the current period due to the high comparison base from the post-pandemic recovery last year. While AI sales have bolstered profitability amid challenges in iPhone sales, the company remains optimistic about its prospects for the upcoming year, supported by increased project wins and customer inventory rebuilding.

JPMorgan analysts project a continued rally for Foxconn, particularly in AI server infrastructure, from the second half of the year. With estimates suggesting a significant AI revenue and gross profit exposure by 2025, the company is well-positioned to capitalize on the growing demand for AI technologies. However, reliance on Apple for a substantial portion of revenue poses challenges, especially as iPhone sales in China experienced a notable decline.

In light of evolving market dynamics and competition, Hon Hai’s strategic focus on AI hardware sales is expected to drive growth and profitability in the coming years, solidifying its position as a key player in the technology sector.

–With assistance from Abhishek Vishnoi.

(Updates with analyst reaction and chart)

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