Apple Inc. AAPL supplier Taiwan’s Hon Hai Precision Industry Co Ltd HNHPF, operating as Foxconn, is looking to capitalize on the AI server market through a strategic partnership with Nvidia Corp. NVDA, according to a prominent analyst.
What Happened: Ming-Chi Kuo, an analyst at TF International Securities, on Thursday shared his insights on Nvidia’s AI server market strategy. Kuo noted that Foxconn, also known as Hon Hai, is expected to benefit from a closer partnership with Nvidia in the long run.
However, he pointed out that Nvidia has recently altered its GB200 development strategy, investing more in its system development and “reducing its dependance” on Hon Hai/Ingrasys’ GB200 development.
This shift may have led to an overly optimistic market view of Hon Hai/Ingrasys’ system development advantages, order visibility, and GPM in GB200.
“GB200” is a GPU that is tailored for use in data centers. It was unveiled by the company in October as part of its AI product strategy for 2024 and 2025.
Kuo also highlighted that the current shipment visibility of GB200 is not high, and it is currently difficult for most suppliers to estimate the actual contribution. Customer concerns about adopting Grace are one of the main reasons for the current low visibility of GB200 shipments.
“Customer concerns about adopting Grace are: 1) the ROI of continuing to build AI computing power and 2) the bargaining power against Nvidia will continue to erode in the long term,” he stated.
Why It Matters: Foxconn’s move to tap into the AI server market comes at a time when the company is experiencing a revenue dip due to a quieter market demand. In January earlier this year, the Apple supplier forecasted a decline in first-quarter revenue following a slow market demand in the last quarter.
The first quarter tends to be slower for tech companies like Foxconn, following the busy holiday season when they supply electronics to major vendors such as Apple for Western markets.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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