Foxconn's AI Demand Remains Strong: U.S. and Japanese Foreign Investors Raise Target Prices to Over 400 Post-Earnings Call

After Foxconn's (2317-TW) earnings presentation, foreign brokerage firms issued updated reports highlighting continued strengthening in demand for AI servers, ASICs, and high-speed networking products. The commencement of mass production for next-generation AI racks and optical communication products is expected to drive upward revisions to Foxconn's future profit outlook.

Specifically, U.S.-based Citigroup maintained its "Buy" rating while raising its target price from NT$360 to NT$400. Similarly, Japan-based Nomura also kept its "Buy" rating but significantly increased its target price from NT$352 to NT$435.

The U.S. broker noted that visibility into Foxconn's AI-related business has further improved compared to three months ago, primarily due to continued increases in capital expenditures by cloud service providers (CSPs) and robust demand for AI servers. It expects AI rack shipments to grow at a double-digit rate quarter-on-quarter in Q3, with full-year AI rack shipments maintaining year-on-year exponential growth.

Moreover, the next-generation VR-compatible AI racks are expected to enter mass production in Q3 and accelerate shipments in Q4, potentially becoming mainstream products by 2027. ASICs are also expected to become another major growth driver, potentially accounting for approximately 40% of AI server shipments in the long term.

In networking, Foxconn maintains its goal of doubling shipments of 800G+ switches by 2026, with CPO (Co-Packaged Optics) and next-generation high-speed switch products gradually ramping up to volume production.

The U.S. broker praised Foxconn’s expansion from AI servers into comprehensive AI infrastructure, including AI racks, networking, modular data centers, and supercomputing facilities. Its strengths in vertical integration and automation are expected to enhance market share, operational leverage, and profitability.

On profitability, the U.S. broker forecasts Foxconn’s net profit for 2026 at NT$270.736 billion (up 42.9% YoY), with EPS at NT$19.45. For 2027, net profit is projected at NT$349.44 billion (up 29.1%), EPS at NT$25.11. In 2028, net profit is estimated at NT$400.57 billion (up 14.6%), EPS at NT$28.78.

Meanwhile, the Japanese broker believes AI remains Foxconn’s primary growth engine. Beyond existing CSP clients, the expansion of Neocloud operators and rising demand for ASICs such as Google’s TPU could bring additional orders. Furthermore, NVIDIA’s next-generation platform and upgrades to optical communication architectures are expected to boost demand for Foxconn’s AI servers and networking products.

As a result, the Japanese broker revised Foxconn’s profit forecasts for 2026–2028 upward by 12.8%, 23.4%, and 24.9%, respectively. Using a 2027 EPS of NT$25.57 and a 17x P/E ratio, it raised the target price from NT$352 to NT$435, maintaining its "Buy" rating.