Foxconn's Gross Margin Likely to Be Slightly Diluted in Coming Quarters — Market Talk

Foxconn Technology's gross margin could be slightly diluted with the rising average selling price of AI servers in the following quarters, Daiwa analysts say in a research note. Daiwa hikes the ASP for its AI servers by 5-10% to reflect its underestimation of the ASPs for next-generation Nvidia AI servers. AI server revenue is inflated by more expensive pass-through components, such as GPUs and HBM memory, but Foxconn earn only modest markup percentages on those parts. "Although Nvidia's rising AI server contribution should dilute cloud profitability, we believe Hon Hai has mitigated the negative impact by integrating more in-house components and adopting a consignment business model," the analysts say. Shares are last 2.0% higher at NT$249.50. (sherry.qin@wsj.com)