Major U.S. technology companies, including Nvidia (NVDA), Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT), are aiming to reduce reliance on China for artificial intelligence (AI)-related hardware, according to the Wall Street Journal. To achieve this, these companies have requested that their supplier, Foxconn Technology, also known as Hon Hai Precision Industry (HNHPF), boost its production in Mexico.
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It is worth mentioning that Taiwan-based Foxconn and other manufacturing companies have increased their investments in Mexico over the past few years. Foxconn alone has invested around $690 million in the country in the past four years.
Reasons Behind Tech Giants’ Production Shift to Mexico
The escalation of technological and national security tensions between the United States and China has prompted companies to reevaluate their supply chains. Both countries have implemented regulations and bans on the export of sensitive, cutting-edge technologies, prompting firms to look for alternative arrangements.
Additionally, the USMCA, a free trade agreement signed in 2020 between the US, Mexico, and Canada, is driving manufacturers to diversify away from China towards Mexico.
Interestingly, the agreement has attracted not just the AI hardware manufacturers but several automakers as well. As per the data released by the International Organization of Motor Vehicle Manufacturers (OICA), vehicle production in Mexico increased 14% year-over-year to about 4 million in 2023.
Which are the Best Tech Stocks to Buy?
Wall Street analysts are currently bullish on all four stocks: NVDA, MSFT, AMZN, and GOOGL. Analysts anticipate the highest upside potential of 16.2% in Amazon stock. Also, AMZN stock carries a Smart Score of “Perfect 10.” Thus, Amazon seems to be the best technology stock among the four.
