AI, Smartphone Drive Foxconn Revenue, Supporting These Holdings
Ciena and HPE say our theses for these two stocks are playing out.
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*Foxconn’s August revenue supports our stance on several portfolio holdings
*Comments from Ciena and HPE add further support from Nvidia and Marvell
*Amid a nervous market, here’s what we’re watching for Marvell and Nvidia
Ahead of Apple’s AAPL “Glowtime” event next week, its key manufacturing partner Foxconn reported August revenue that soared just shy of 33% year over year.
Powering that revenue was AI-related server demand as well as computing and cloud/networking products. On its own, that’s a positive data point for our shares of not only Apple, Qualcomm QCOM and Universal Display OLED, but also Nvidia NVDA and Marvell MRVL.
Pulling the focus back some, and looking at Foxconn’s July and August revenue together, it’s up 27% quarter to date. While some will point to that confirming strong AI-related demand, which it does, it also shows the ramp in smartphone production, especially for iPhone.
We continue to think Apple will need to wow folks at next week’s event to foster the iPhone upgrade cycle by making Apple Intelligence a “want.” The onus will be on Apple to showcase Apple Intelligence applications that resonate with consumers and businesses, and you can color us cautiously optimistic. There will be several follow-throughs from the event, including what key supply chain members and carrier partners are saying about demand for new iPhone models. Another gauge will be September and October revenue from Foxconn, which tends to be the highest level of the year for the company. It makes sense, given iPhone production and shipping timetables, new model launches and shelf stocking. We’ll look for confirmation that things are tracking when we get TSM’s TSM August revenue
The last day also brought encouraging comments from Ciena CIEN as it relates to our holdings in Nvidia and Marvell. The earnings call comment that stood out to us, especially for Marvell, was “… bandwidth demand continues to be strong and is growing, particularly with the anticipated rise in AI-driven network traffic and increased cloud adoption.”
Cienna’s book-to-bill ratio exiting the quarter above 1.0, meaning it took in more orders than it shipped during the period, supports the turnaround we’ve been thinking about for Marvell's enterprise networking and carrier infrastructure businesses.
Hewlett Packard Enterprises HPE also delivered some very reassuring comments as it relates to AI. It also shared on its call that it is “encouraged by the recovery in enterprise demand we are seeing in North America…”
Couple this with other recent comments from Dell DELL, ServiceNow NOW, Cisco CSCO, Foxconn above, and others, and we remain bullish on Nvidia and Marvell.
With Marvell, we continue to rate MRVL shares a one, and our price target remains $95. Should Marvell shares move past the $80 level, we may need to revisit our current rating.
For Nvidia, the shares have crossed below the 100-day moving average, which means that if they do not close above that level in the very near term, it will be a point of resistance for the shares. A stronger-than-expected August revenue report could be a catalyst for the shares, and it is one we will be watching especially from a technical perspective.
At the time of publication, TheStreet Pro Portfolio was long AAPL, QCOM, OLED, NVDA, MRVL and NOW.
