The maker of server casings and racks doubled its first-half profit on rising AI server demand, but its shares have been hit by investor jitters about the sustainability of the industry’s spending boom.
By Doug Young
Karrie International (1050.HK), a Hong Kong manufacturer of server enclosures and racks, has become a beneficiary of surging demand for AI infrastructure. But its shares have come under pressure as a broader selloff in technology stocks has exposed growing uncertainty over the durability of the AI investment boom.
The company’s stock fell 2.4% on Nov. 5, following the release of its latest results, before declining another 2.5% in morning trading the next day. The losses coincided with a sharp selloff in technology stocks, with the Nasdaq Composite Index plunging 5.5% on Nov. 5, its steepest single-day decline in more than a year. Taiwanese competitors Chenbro Micom (8210.TW) and Asia Vital Components (3017.TW) fell 6% and 9%, respectively.
Despite the recent weakness, Karrie’s shares remain more than twice their level before a surge that began in May 2025. The rally was associated with Nvidia’s designation of the company as a qualified and recommended supplier of server chassis and rack components, a relationship the company publicly disclosed in September last year.
Entering the AI supply chain
Founded in 1980 by Ho Cheuk Fai, Karrie has a long history in manufacturing. Ho began working as a factory apprentice at age 12 in the 1950s and established his first business at 17, according to a 2017 profile in the Hong Kong Commercial Daily.
In 1985, he became one of the earliest Hong Kong entrepreneurs to establish a factory across the mainland Chinese border in Dongguan, now a major manufacturing center in Guangdong province.
The company’s transformation into a supplier of higher-specification AI server hardware has coincided with a leadership transition. In September, Ho, now 80, retired as CEO while retaining his position as chairman. His 36-year-old son, Ho Wai Hon, also known as Brian, took over the chief executive role.
The succession marks a generational change at a company adapting to the demands of AI infrastructure. However, leadership transitions can introduce execution risks, particularly when a business is simultaneously undergoing a significant strategic shift.
Karrie also faces uncertainty over whether demand for AI-related hardware can sustain its current momentum.
AI products boost revenue and profit growth
Karrie’s financial performance was relatively modest before its AI-related rally. Revenue for the fiscal year ended March 2026 increased 7.4% to HK$3.47 billion ($442 million), slowing from 10.6% growth in the preceding year.
Server enclosures accounted for 57% of revenue, generating HK$1.97 billion, up 7.1% year-on-year. Storage products contributed HK$1.27 billion, an increase of 5.8%, while electric vehicle charger enclosures generated HK$234 million, up 23%. Profit rose at a much faster pace, jumping 32.4% to HK$271 million, reflecting a shift toward higher-margin AI server products.
The acceleration became more pronounced in the current fiscal year. Revenue for the three months ended Sept. 30, Karrie’s second fiscal quarter, increased 45% year-on-year.
Revenue from server enclosures rose 48%, while AI-use enclosures accounted for 34% of the segment’s revenue, up from 20% in the preceding quarter. Revenue from AI-use server enclosures increased 87% sequentially between the first and second fiscal quarters.
The company is also expanding its product portfolio beyond traditional server casings to include a wider range of server rack products.
Storage revenue rose 51% year-on-year in the second quarter, although Karrie did not specify how much of the increase was attributable to AI demand.
The company’s first-half profit doubled, driven by the expansion of AI-related products and higher sales of newer server racks and next-generation AI platforms. Karrie also cited economies of scale and improved operational efficiency at its Thailand production facility, which began commercial operations in 2023.
Valuation offers a cushion, but AI risks remain
Karrie’s shares peaked at just over HK$3 in May, up from around HK$0.70 in April 2025 before the AI-related rally. The subsequent decline has reduced its trailing price-to-earnings ratio to approximately 14.
That valuation is below Chenbro Micom’s 17 and Asia Vital Components’ 38, potentially making Karrie relatively attractive to investors expecting sustained revenue and profit growth over the next two to three years.
However, the recent market selloff highlights the risks facing companies exposed to AI infrastructure spending. Even manufacturers benefiting from strong demand and improving margins remain vulnerable to changing investor expectations.
If spending on AI hardware begins to slow, Karrie could face further pressure on its share price, despite its improving operating performance.
Source:
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