Investment in artificial intelligence has boosted a number of technology stocks. The latest beneficiary is Taiwan’s Foxconn, which hit a record closing high on Thursday as it is set to benefit from growth in AI servers.
Shares of Hon Hai Precision Industry, as the company is officially called, rose 4.7% to close at 155.50 new Taiwanese dollars ($4.86).
The boost came after analysts at J.P. Morgan wrote in a research note that they expect AI servers to represent 18% of Foxconn’s total revenue in 2025. That’s due to its AI server assemblies and racks housing Nvidia’s new GB200 configuration, combining the B100 graphics-processing unit with its Grace central-processing unit.
“Hon Hai is still trading at a significant discount to other ODMs [original design manufacturers]…and we expect this gap to narrow over the next few quarters,” J.P. Morgan analyst Gokul Hariharan wrote.
Hariharan raised his target price on Foxconn stock to 170 new Taiwanese dollars from 140 new Taiwanese dollars, keeping an Overweight rating on the stock.
Good news for Foxconn is normally good news for Apple, but not in this case. Hariharan said he expected Foxconn’s iPhone manufacturing volumes to fall around 5% in 2024 due to Apple’s market share losses in China.
Apple’s Antitrust Angst
It’s not just slowing iPhone sales in China that Apple is grappling with. The Justice Department filed a lawsuit against the company last week, contending that Apple violated antitrust laws by using an assortment of strategies to cement the iPhone’s dominance in the U.S. smartphone market and build its collections of services.
The case will likely take several years to reach trial but CFRA Research said it sees a 75% probability of the DOJ being successful. But Nick Rodelli, head of legal research, said the trial wasn’t the most negative development for Apple in the past week. That goes to the “quickly growing roster of large and influential companies…openly attacking Apple’s business tactics,” including X, Microsoft, and Meta.
Apple rejected the DoJ’s claims and said: “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets.”
Apple shares were down 1.4% in morning trading.
U.S. Chip Makers Meet China’s Xi Jinping
Hopes of easing tensions in the long-running tech trade war between the U.S. and China have been given a boost.
China’s leader Xi Jinping met with CEOs of several U.S. companies, including chip makers Qualcomm and Broadcom, in Beijing Wednesday with the aim of improving confidence in the world’s second largest economy.
Xi said the relationship between the U.S. and China “can embrace a bright future,” according to an English language readout of the meeting published by the Chinese Embassy in the U.K.
“China and the United States should help rather than hinder each other’s development, both in traditional areas such as trade and agriculture, and in emerging areas such as climate change and artificial intelligence,” he added.
Granted, Xi is trying to boost foreign investment in China, which fell 8% in 2023 and 19.9% in the first two months of 2024. But if his remarks are backed up by actions, his motives may not matter much for U.S. tech companies and investors.
His reference to AI may be of particular interest to Nvidia and other U.S. chip makers. The U.S. government tightened curbs on exports of certain AI chips to China in October last year.
But Xi and President Biden have both expressed a desire for tensions between the two nations to thaw over the past year, with little tangible impact to show for it. It’s time for them to walk the walk.
Write to Callum Keown at [email protected] and Adam Clark at [email protected]
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