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(Sharecast News) - Infineon Technologies said on Wednesday that it would accelerate investment in artificial intelligence-related technology to offset a prolonged slump in automotive and industrial chip demand, as strong data-centre growth helped underpin its start to the financial year.
The German chipmaker said it would lift planned capital expenditure to about 2.7bn in the current fiscal year, up 500m from its previous target, as it ramped up manufacturing capacity for chips used in AI data centres.
Chief executive Jochen Hanebeck said the move reflected "very dynamic demand for AI, against an otherwise subdued market backdrop," adding that the company was bringing forward investment "to meet further rising demand".
Infineon said it expected revenue from its AI and data-centre business to reach about 1.5bn in the current year and rise to 2.5bn in 2027, equivalent to a tenfold increase in AI sales within three years.
Chief financial officer Sven Schneider said AI demand was "the biggest growth driver in the history of the company", contrasting it with automotive and industrial markets that had "gone beyond the trough" without a clear recovery.
The company reported first-quarter revenue of 3.66bn, slightly ahead of market expectations, with its adjusted operating margin rising to 17.9%.
Automotive revenue, which accounts for roughly half of group sales, also came in marginally above forecasts at 1.8bn, though Infineon said demand in the segment remained weak as customers worked through excess inventories built up during the pandemic.
As part of its push to diversify beyond its core automotive exposure, Infineon also agreed to acquire the automotive, industrial and medical sensor business of AMS Osram for $673m in cash.
The deal, which would be funded with additional debt, was expected to generate around 230m in sales this calendar year and strengthened Infineon's position in sensors used in vehicles, health devices and robotics.
For the current quarter, Infineon forecast revenue of about 3.8bn, in line with analyst estimates, and said it expected its adjusted operating margin to remain in the mid-to-high teens.
The group reiterated its outlook for moderate revenue growth in the financial year ending September 2026.
Shares were volatile following the results, with Bloomberg noting that the stock fell about 2% in Frankfurt trade, while Reuters reported gains earlier in the session as investors focused on the improved AI outlook.
At 1249 CET (1149 GMT), shares in Infineon Technologies were down 1.9% in Frankfurt at 40.29.
Reporting by Josh White for Sharecast.com.