On Monday, Marvell Technology’s stock surged by 23% following the chipmaker’s impressive third-quarter performance and a positive forecast. The company reported that its data-center revenue nearly doubled compared to the previous year, reaching $1.1 billion, largely due to a significant rise in demand for artificial intelligence technologies. This uptrend highlights a broader shift among investors towards sectors associated with AI and semiconductors.
According to Marvell’s CEO, Matt Murphy, the firm’s AI-related income is expected to exceed $1.5 billion during the current fiscal year and may reach $2.5 billion by 2025. The data-center division currently constitutes 73% of Marvell’s overall revenue, a substantial increase from 39% in the same timeframe last year. In the recent quarter, Marvell surpassed expectations by achieving earnings of 43 cents per share, exceeding the forecast of 41 cents.
Quarterly revenue increased by 19% from the previous quarter to $1.52 billion, outpacing estimates of $1.46 billion. The company anticipates that revenue for the fourth quarter will reach $1.8 billion, with cash earnings projected at 59 cents per share, both exceeding analyst forecasts. Additionally, Marvell revealed a five-year collaboration with Amazon Web Services aimed at enhancing its Trainium AI chips alongside other tailored computing solutions.
Marvell’s Growth in AI Revenue
This initiative aims to improve efficiency and reduce expenses for AWS and its clientele, illustrating the necessity for significant cloud infrastructure providers to broaden their AI hardware offerings. At present, much of the AI training is reliant on Nvidia’s costly graphics-processing units.
Rising costs and supply chain issues have prompted cloud service providers—including Amazon—to seek more cost-effective alternatives like Marvell’s offerings. Following these favorable updates, numerous analysts have revised their stock price targets for Marvell. Benchmark raised its price objective to $135 from $115, maintaining a buy rating and classifying Marvell as a “distinct non-Nvidia option to leverage the AI/data center dynamics.” Bank of America analyst Vivek Arya raised his target price to $125 from $108, highlighting Marvell’s potential for substantial growth in AI electro-optics and custom chip markets.
Citi also increased its price target to $112 from $91, praising Marvell’s robust quarter and the AWS partnership. However, some analysts remain cautious due to the stock’s elevated valuation. Morgan Stanley raised its price target to $102 from $82 while maintaining a neutral stance, citing the strong momentum from the Trainium 2 chip developments for Amazon as a critical factor, but still expressing valuation concerns.
Marvell’s shares closed at $118.15 on Monday, having more than doubled this year. As the company continues to capitalize on AI-related demand and its significant alliance with AWS, it will be interesting to see if Marvell can maintain this growth trajectory and compete with Nvidia’s stronghold in the AI chip sector.
