Semiconductor stocks experienced a significant rally on Monday following strong quarterly earnings from Foxconn that highlighted robust demand for artificial intelligence servers. Nvidia led the charge with a 5% surge, while other major US chip manufacturers posted impressive gains: Advanced Micro Devices climbed 4%, Micron Technology jumped 12%, and both Broadcom and Qualcomm rose approximately 3%.
The rally extended beyond US borders, with Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, surging 5%, and Dutch chipmaking equipment producer ASML gaining an impressive 8%. This broad-based momentum reflects growing investor confidence in the AI infrastructure buildout.
Foxconn’s fourth-quarter 2024 revenue reached NT$2.132 trillion ($64.75 billion), representing a 15% year-over-year increase and marking the company’s highest fourth-quarter revenue on record. The results exceeded analyst expectations of NT$2.07 trillion, according to FactSet data. The tech manufacturer, which serves as a key production partner for industry giants like Apple and Nvidia, attributed its strong performance to its cloud and networking segments, specifically citing robust demand for AI servers.
The timing of the rally is particularly notable as Nvidia CEO Jensen Huang prepares to deliver the keynote address at the Consumer Electronics Show in Las Vegas. Huang’s previous appearances at CES have historically served as positive catalysts for Nvidia’s stock price, adding to Monday’s momentum.
The semiconductor sector has been the primary driver of the S&P 500’s remarkable performance over the past two years, with Nvidia alone posting a staggering 171% gain in 2024. This dominance has been fueled by massive investments in AI infrastructure, including Microsoft’s recent announcement of an $80 billion spending plan for AI data centers.
Looking forward, Foxconn provided optimistic guidance, projecting “significant growth” in sales for the current quarter. The company stated that despite achieving record-high revenue in Q4 2024, first-quarter performance would reach levels roughly average to the past five years sequentially, while showing significant year-over-year growth. Foxconn’s stock responded positively to the earnings beat, rallying 3%.
While the sector has experienced some volatility—including a brief summer sell-off driven by investor concerns about returns on heavy AI investments—the latest earnings results and forward guidance suggest sustained momentum in AI infrastructure demand.
Key Quotes
Even with record high revenue in the fourth quarter of 2024, the sequential performance of the first quarter will reach roughly similar levels that are average to the past five years; compared with a year ago, it should show significant growth
Foxconn’s forward-looking statement demonstrates confidence in sustained AI server demand. This guidance is particularly significant because it suggests the company expects year-over-year growth to continue despite already achieving record revenue levels, indicating the AI infrastructure buildout has substantial runway ahead.
Our Take
The synchronized rally across the semiconductor sector reveals an important inflection point in the AI investment narrative. After summer 2024’s brief sell-off sparked by ROI concerns, Foxconn’s concrete revenue numbers—driven specifically by AI servers—provide the tangible proof investors needed that enterprise AI spending remains strong. What’s particularly noteworthy is the global nature of this rally, with gains spanning from US chip designers to Asian manufacturers and European equipment makers. This suggests the AI infrastructure buildout is creating a rising tide that lifts the entire semiconductor ecosystem. However, the sector’s heavy concentration of market gains—with Nvidia up 171% in 2024 alone—raises questions about sustainability and potential overvaluation. The real test will be whether AI applications can generate sufficient revenue to justify the massive infrastructure investments companies like Microsoft are making.
Why This Matters
This earnings report and subsequent market rally provide critical validation for the ongoing AI infrastructure boom that has dominated technology investment over the past two years. Foxconn’s record-breaking revenue, driven specifically by AI server demand, offers concrete evidence that enterprise spending on AI capabilities remains robust despite earlier concerns about return on investment.
The broad-based rally across the semiconductor ecosystem—from chip designers like Nvidia and AMD to manufacturers like TSMC and equipment makers like ASML—demonstrates that AI demand is creating value across the entire supply chain. This suggests the AI buildout is not a speculative bubble but a fundamental shift in computing infrastructure requirements.
For businesses, this signals that competition for AI capabilities will intensify, potentially driving up costs for AI infrastructure while also validating investments in AI transformation. The sustained demand also has implications for global semiconductor supply chains and geopolitical considerations, particularly given Taiwan’s central role in chip manufacturing. As companies like Microsoft commit tens of billions to AI data centers, the semiconductor industry’s ability to meet this demand will be crucial for the broader AI revolution’s success.
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