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Precision Powerhouse With The AI Supply Chain Giant Hitting New Highs

Author

Noah Zelvis
August 16, 2025

Fabrinet (NYSE: FN) has quietly become one of the most critical suppliers in the AI arms race.

Shares have surged nearly 100% since April, hitting an all-time high of $345.90, and the company is set to report Q4 fiscal 2025 earnings after the bell on Monday, August 18.

Expectations are running high, but the real story may be what lies beyond this quarter.

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Strategic Positioning: The Behind-the-Scenes Enabler of AI

Fabrinet doesn’t design AI chips or run the data centers, they make the precision optical, electro-mechanical, and advanced packaging components that make them possible.

The company’s products are embedded in high-speed transceivers, networking cables, and other interconnect hardware that AI workloads depend on.

This is not a low-value manufacturing business.

FN’s optical packaging and advanced manufacturing capabilities are essential for moving massive volumes of data at lightning speeds between servers in AI clusters.

Its datacom segment, in particular, has been benefiting from an explosion in hyperscale data center construction.

Two client relationships stand out:

  • Nvidia – Roughly 35% of FY24 revenue came from the AI chip leader. Fabrinet supplies critical optical components for Nvidia’s data center infrastructure, directly tying its growth to the most important player in AI hardware.

  • Amazon – In March, Amazon agreed to purchase warrants for up to 381,922 FN shares at $208.48 each, a move that deepens its supply chain integration and positions Fabrinet as a long-term partner in building out AWS’s AI capabilities.

Other notable customers include Cisco Systems and Lumentum, giving Fabrinet diversified exposure to networking and telecom markets.

Action: Initiate or add to positions between $305–$320 ahead of earnings, with a watch for any post-report consolidation as a potential buying opportunity.

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Momentum Building Into Earnings

Over the past five years, FN has averaged 13% annual revenue growth, with GAAP earnings climbing an average of 28% annually over the last four.

Wall Street expects FY25 revenue to rise 18% and FY26 another 17%, reaching nearly $4 billion in annual sales.

Earnings per share are projected to grow 15% in FY25 and 18% in FY26. Q4 consensus calls for $2.63 EPS on $880 million in revenue.

Consensus earnings estimates have been trending higher since the last quarterly report, which showed strength in datacenter interconnect products and reaffirmed long-term growth potential in AI-driven demand.

Analyst sentiment is mixed, but price targets have been moving up:

  • Rosenblatt: $290 Buy

  • JPMorgan: $318 Neutral

  • Needham: $280 Buy

  • Wolfe Research: Peer Perform

With the stock already well above the average $261.33 consensus, the next upside catalyst will have to come from either a beat-and-raise earnings report or new strategic announcements.

Action: If earnings beat and guidance is raised, watch for a breakout above $356.55 to trigger technical buying interest.

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Valuation: Premium for a Reason

At ~36x forward earnings, Fabrinet trades well above typical hardware manufacturing multiples. But its business model isn’t typical. The company boasts:

  • Nearly $1 billion in cash and equivalents vs. $712 million in total liabilities

  • 97.38% institutional ownership, with major stakes added in Q2 by Capital Research Global Investors (+675%) and TD Asset Management (+25%)

  • Exposure to multi-year secular growth trends in AI, cloud computing, and high-speed networking

Gross margins in the high teens may seem modest compared to software names, but for precision manufacturing in a high-demand vertical, they reflect both operational efficiency and pricing power.

Technicals: Extended, But Not Broken

FN’s run from $175 in early April to $345 this week has taken it from deeply oversold RSI levels to some of its most overbought readings in a decade.

The stock remains well above both its 50-day ($293) and 200-day ($238) moving averages, suggesting any pullback could still leave it in a strong uptrend.

The key near-term technical levels to watch:

  • Support: $305 (21-week MA test), then $280 (prior breakout zone)

  • Resistance: $356.55 (52-week high)

  • Volume: Average daily trading volume has climbed ~70% since April, pointing to strong institutional accumulation.

Action: Consider partial profit-taking near $350 if you bought below $250, then redeploy on pullbacks to $300–$310.

Financial Strength and Client Leverage

Fabrinet’s balance sheet is a standout, with net cash positive, no dividend obligations, and flexibility to invest in capacity expansions without taking on heavy debt.

This is critical as AI infrastructure demand ramps.

The Amazon warrant deal also serves as an important signal: big tech customers are not just buying from Fabrinet; they are investing in its future.

Such arrangements can cement supplier relationships for years, making revenue streams more predictable.

Risks to Watch

While the setup is bullish, investors should stay alert to potential headwinds:

  • Valuation Compression: A miss or soft guidance could hit the stock hard at current multiples.

  • Customer Concentration: Heavy reliance on Nvidia (35% of revenue) means any slowdown there could ripple through Fabrinet’s results.

  • Competitive Pressure: Other advanced manufacturing firms are targeting similar optical component markets.

  • Cyclicality: Despite AI-driven growth, networking hardware demand can be cyclical if hyperscale capex pauses.

Final Word: A Core AI Infrastructure Play

Fabrinet isn’t a flashy consumer brand, but it’s a critical cog in the AI and cloud infrastructure machine.

The market has rewarded it for that role with a near-doubling in share price since April, and its customer list reads like a who’s who of the next decade’s growth leaders.

The stock is extended in the short term, and earnings next week will be a major test.

But for investors with a multi-year horizon, FN’s role in supplying the backbone of AI data centers, its fortress balance sheet, and its deep customer relationships make it one of the most compelling long-term AI infrastructure bets in the market today.

Action Recap:

✅ Pre-Earnings Entry: Accumulate between $305–$320 ahead of the August 18 earnings call.
✅ Breakout Watch: Buy on a decisive close above $356.55 with volume confirmation.
✅ Buy-the-Dip Zones: $300–$310 as first reload level; $280 as stronger support.
✅ Monitor Catalysts: Nvidia and Amazon infrastructure orders, backlog growth in datacom segment, and any capacity expansion announcements.
✅ Risk Management: Set alerts near $280 and $260 to reassess position size if trend weakens.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider