The logo of Foxconn is seen outside the company's building in Taipei, Taiwan November 10, 2022. REUTERS/Ann Wang
TAIPEI (Reuters) -Taiwan's Foxconn, the world's largest contract electronics maker, offered a bullish outlook on AI-related demand on Wednesday saying it would be a big driver of 2026 growth, and teased an announcement next week with OpenAI.
Nvidia's biggest server maker and Apple's top iPhone assembler has been riding a data centre boom, as cloud computing firms such as Amazon, Microsoft and Alphabet's Google spend billions of dollars to expand their AI infrastructure and research capacity.
Foxconn Chairman Young Liu told an earnings call that the importance of AI would massively increase next year, though the company would also keep a wary eye on geopolitical and currency issues.
"Generally speaking, judging from what we see now, I am very optimistic about the AI market next year," he said.
Companies announcing multi-billion-dollar investments in artificial intelligence have raised concerns about the formation of a bubble reminiscent of the dotcom boom and bust.
But Liu said the industry was only getting started.
"The development of AI is still just beginning," he said.
In the third quarter, revenue of Foxconn's cloud and networking business, which includes AI servers, exceeded that of its smart consumer electronics - such as iPhones - for the second quarter in a row.
In its earnings report, Foxconn said it should see significant year-on-year revenue growth in the fourth quarter, with AI server revenue expected to increase quarter-on-quarter.
It also forecast significant annual revenue growth, in line with previous guidance given in August. It did not elaborate and the company does not provide numerical guidance for its outlook, whether full-year or quarterly.
OPENAI-RELATED ANNOUNCEMENT COMING NEXT WEEK
Foxconn, formally called Hon Hai Precision Industry, will host its annual tech day in Taipei next week.
Liu said there would be an announcement at that event related to ChatGPT creator OpenAI, though he did not provide details.
OpenAI did not immediately respond to a request for comment.
Foxconn posted on Wednesday a forecast-beating 17% rise in third-quarter profit, fuelled by the sustained strength in demand for AI servers.
Net profit for the July-September period was T$57.67 billion ($1.89 billion), higher than the consensus estimate of T$50.4 billion compiled by LSEG.
Foxconn last month reported better-than-expected third-quarter revenue on strong demand for AI products.
The company has been looking to expand its footprint in electric vehicles, which it sees as a major future growth generator, though that has not always gone smoothly.
In August, Foxconn said it had struck a deal to sell a former car factory at Lordstown, Ohio, for $375 million, including its machinery, that it purchased in 2022 to manufacture EVs.
Foxconn's shares have surged 36% so far this year, outperforming the broader Taiwan index's 21% gain.
Its shares closed up 1.8% on Wednesday ahead of the earnings release.
($1 = 30.5930 Taiwan dollars)
(Reporting by Wen-Yee Lee and Ben Blanchard; Editing by Muralikumar Anantharaman)
