Key Highlights

  • Flex announced a $2.0 billion Series A convertible preferred Investment into its Axiom unit.
  • The investment values Axiom's initial Enterprise value at $37.5 billion ahead of a planned spinoff.
  • Flex plans to spin Axiom off as a separate public company in the first quarter of 2027.
  • The deal is tied to Flex's earlier Acquisition of EPC Power.

Flex shares rose on Monday after the manufacturer announced a $2.0 billion convertible preferred investment into Axiom, its cloud and power infrastructure unit, ahead of a planned spinoff.

Big Money for a New Unit

Flex (NASDAQ:FLEX) rose on Monday, Oct. 5, after unveiling a major funding deal for the Business it plans to spin off. The company announced a $2.0 billion Series A convertible preferred investment into Axiom, its cloud and power infrastructure unit, led by General Catalyst with Koch Equity Development.

The investment puts Axiom's initial enterprise value at $37.5 billion. Flex plans to spin Axiom off as a separate public company in the first quarter of 2027. The transaction is tied to Flex's acquisition of EPC Power.

Reports differed on how far the stock moved. One report showed a stronger gain by mid-morning, while another showed a smaller rise later in the day, suggesting some of the early enthusiasm cooled. Either way, Flex finished among the gainers on the Russell 1000.

What Axiom Is

Flex is one of the world's largest contract manufacturers, building products for other companies across many industries. Axiom groups its cloud and power infrastructure business, which serves the data centers being built for artificial intelligence.

That is one of the most closely watched corners of the market. Power and cooling gear for data centers has drawn heavy investor interest as AI spending climbs. A large outside investment at a sizable valuation can be read as a signal that private investors see value in that business as a stand-alone company.

Convertible Preferred, Briefly

A convertible preferred investment gives investors a security that ranks like a preferred share but can later be converted into common stock. For Flex, it brings in outside Capital and sets a valuation marker for Axiom before the spinoff, without an immediate sale of common shares. Because the securities are preferred, they typically sit ahead of common stock in the capital structure.

AI Infrastructure in Favor

Monday's market rewarded AI exposure. Nvidia (NASDAQ:NVDA) rose to a record close, with a Market Value of about $5.7 trillion. The Nasdaq Composite climbed 286.45 points to a record 27,477.31, and the Nasdaq-100 also hit a record. The S&P 500 rose 51.23 points to 7,773.95, just shy of its summer record, and the Dow added 90.94 points to 51,267.90.

Data-center power stocks had other news too. Vistra (NYSE:VST) rose after the Department of Energy made a conditional Loan Commitment of up to $4.2 billion for nuclear plant upgrades. BMO Capital initiated Vertiv Holdings (NYSE:VRT) at Outperform, citing data-center demand. Microchip Technology (NASDAQ:MCHP) and Navitas Semiconductor (NASDAQ:NVTS) announced an 800-volt reference design for next-generation AI data centers.

Rates were the one cloud hanging over the rally. Friday's weak September jobs report, with payrolls up just 29,000, cut bets on an October Fed hike, but the 10-year Treasury Yield still climbed to its highest level since 2002. The ISM services survey also showed prices paid at their highest since July 2022.

What to Watch Next

For Flex, the next milestones are the steps toward the Axiom spinoff, targeted for the first quarter of 2027, along with the company's next quarterly report, which may offer more detail on the unit's growth.

Macro events also loom. The Fed's September meeting minutes arrive Wednesday, Oct. 7, at 2 p.m. ET, and the Fed meets again Oct. 27-28. Earnings season builds with PepsiCo (NASDAQ:PEP) on Thursday, Delta Air Lines (NYSE:DAL) on Friday and the big banks from Oct. 13. Microchip and Navitas plan to show their data-center design at a Microchip event on Oct. 12-15.