In This Article:
Shares of artificial intelligence (AI) chipmakers like Broadcom (NASDAQ: AVGO), Marvell Technology (NASDAQ: MRVL), and Arm Holdings (NASDAQ: ARM) rallied on Monday. At one point, they were up by 4%, 4.4%, and 5.4%, respectively. As of 1:26 p.m. ET, their gains had moderated to 1.2%, 1.7%, and 4.9%, respectively.
AI-related chip stocks sold off a bit during the last couple of weeks of 2024, but they got a lift Friday on signs of strong AI chip demand. Then on Monday, another data point emerged that bodes favorably for the near-term outlook of the AI sector.
Foxconn's blowout monthly revenue
On Monday morning, Hon Hai Precision (OTC: HNHPF), also known as Foxconn, released its latest monthly revenue figures. Of note, Foxconn is one of the world's largest electronics assemblers, as it assembles the iPhone. But it also has significant businesses in electric vehicles and, most importantly for this discussion, AI servers.
Foxconn reported massive year-over-year growth of 42.3% in December, its highest figure of any month last year. Furthermore, the company noted its growth was primarily due to high demand for AI servers.
This is an indicator that AI chip demand will remain robust despite the hypergrowth of the past two years. The news dovetailed nicely with a blog post published by Microsoft (NASDAQ: MSFT) on Friday in which it said that it would spend upwards of $80 billion on AI data centers this fiscal year.
Foxconn's December surge may reflect the availability of Nvidia's (NASDAQ: NVDA) new Blackwell chip. The rollout of that hardware had been delayed, but production was supposed to ramp up in late Q4. Of note, Arm licenses its architecture to Nvidia and other cloud giants for their data center CPUs, which often accompany Nvidia GPUs or custom accelerators in AI servers. So, a steepening ramp-up in production of Nvidia Blackwell systems would benefit Arm. Arm also tends to be among the most volatile AI stocks, so it's perhaps not a surprise to see it having strong gains.
While Nvidia and adjacent stocks surged Monday, the Foxconn news was a positive for Broadcom and Marvell as well. These two companies have a nice duopoly as makers of custom accelerator parts that the cloud computing giants incorporate into their own AI accelerator designs. With cloud companies all investing heavily in developing and producing their own chips to cut costs, shares of Broadcom and Marvell have soared.
Foxconn also makes "white label" server components for large cloud companies, which often assemble its subsystems and systems into their own proprietary server designs. So the boom in Foxconn orders actually bodes well not only for Nvidia, but also for Broadcom and Marvell.