Nvidia Ally Hon Hai Sees Sales Soar 24% Thanks to Booming AI Demand

() — Sales at Hon Hai Precision Industry Co. surged in the first quarter, marking their most rapid increase since 2022, driven largely by strong demand from data centers. This growth serves as a positive indicator for the AI industry despite concerns over tariffs.

The supplier from Taiwan that provides AI servers to Nvidia Corp. and iPhones to Apple Inc. is experiencing increased demand due to requirements for servers that support AI computing from companies like Alphabet Inc. and Amazon.com Inc.

In the initial three months of 2025, Hon Hai saw its revenue jump by 24.2%, reaching NT$1.64 trillion ($49.8 billion), which aligns with what financial analysts had projected. The company stated on Saturday that it anticipates continued expansion in its cloud and networking product division during the following quarter.

However, Hon Hai warned that although they anticipate an increase in total sales, "given the present level of insight," they will have to carefully track how changing global political and economic circumstances affect their business.

A Chinese startup called DeepSeek has developed a more affordable AI model, which has raised concerns over increasing price competition and the financial feasibility of investments totaling billions of dollars in data centers. This situation is further complicated by worries about a potential worldwide economic downturn due to the significant tariffs recently imposed by U.S. President Donald Trump.

Indications of vulnerability are surfacing even within the AI industry. Despite declaring its intention to continue investing approximately $80 billion in constructing data centers until June, Microsoft Corp. has scaled down various global initiatives. According to insiders knowledgeable about these matters, discussions regarding locations such as Indonesia, the UK, Australia, along with states like Illinois, North Dakota, and Wisconsin have been terminated or postponed.

Hon Hai, which supplies electronics globally through extensive manufacturing facilities in China and plants in Vietnam, faces an additional significant impact due to the tariffs imposed by the Trump administration. This includes a 54% tax on products coming from China along with a 46% duty on items imported into the U.S. from Vietnam.

The tariffs could have an uneven impact on Apple’s smartphone operations due to their heavy dependence on China, according to CreditSights analysts Jordan Chalfin, Andy Li, and Michael Pugh in a report shared with investors. They noted that even though Apple has been trying to expand into markets like Vietnam and India, this hasn’t offered much respite from the tariff pressures.

The analysts stated that "Directly affected will be hardware Original Equipment Manufacturers (OEMs), notably those dealing with smartphones, personal computers (PCs), and server systems." According to their estimates, these retaliatory tariffs could inflict a roughly $100 billion hit on the worldwide technology industry, considering the total worth of U.S. tech imports in 2024.

What telligence Says

US counter-tariffs targeting areas like Taiwan, Vietnam, and India – major participants in the "China Plus One" initiative – may exert significant strain on electronics manufacturing services companies including Hon Hai and Quanta, possibly undermining their profit margins and market demands. Firms with considerable operations within the US, such as Flex and Jabil, stand to gain unexpectedly from redirected orders. In response, Asian producers could utilize Mexico as an interim buffer while progressively emphasizing establishing a presence within the US itself.

- Analysts Steven Tseng and Sean Chen

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Last month, Hon Hai Chairman Young Liu stated that the company was looking into expanding production in multiple U.S. states. Earlier this year, Apple announced it would be teaming up with Foxconn to start manufacturing servers in Houston. Additionally, other Taiwanese electronics companies are considering similar moves. following suit.

--Assisted by Umesh Desai and Vlad Savov.

(Corrects to indicate that the CreditSights estimate mentioned in paragraph 9 is derived from the value of U.S. technology imports in 2024.)