Marvell Technology: summary and investment perspective

Marvell Technology $MRVL ranks among the semiconductor sector's biggest stars thanks to its 83% stock growth in 2024. A major factor in this success is its burgeoning artificial intelligence (AI) chip business, which includes making ASIC chips for cloud giants. Key customers include Amazon, which has entered into a five-year multi-generational AI chip collaboration agreement with Marvell, and other major data center players.

Reasons for Marvell Technology's growth

1. Strong focus on AI chips:

- $MRVMakesASIC chips that enable cloud giants like Amazon to build their own AI infrastructure.

- $MRVL has also introduced new innovations, such as a custom interface for high-performance memory (HBM), which improves chip performance and reduces power consumption.

2. Growth of the data center segment:

- In the last quarter, data center revenue grew by 98 %, which now accounts for 72.6% of the company's revenue.

3. Large addressable market:

- $MRVL estimates that its AI chip market will grow from the current $21 billion to $75 billion by 2028, and its market share could double to 20%.

Risks and challenges

1. High stock valuation:

- Shares of $MRVL currently trade at 43 times expected earnings for fiscal 2026, an above-average valuation even within the AI sector.

- The valuation reflects high optimism about future growth, but also carries risk should growth in AI slow.

2. Customer Concentration:

- Heavy reliance on key customers such as Amazon could be a problem if their demand were to be curtailed or preferences were to change.

3. Macroeconomic and technological uncertainties:

- The AI market is highly competitive and technological changes may threaten existing products.

Outlook and recommendations

$MRVL has a strong position in the AI and data center market, which could deliver steady revenue and margin growth through 2028. However, the stock's current valuation suggests that much of the positive news is already priced in.

- For stock holders: The stock is a good long-term holding if you believe in the continued growth of the AI market.

- For new investors: Wait for a better entry price, especially if there is a drop in valuation due to a change in market sentiment or a short-term slowdown in AI growth.

- For speculative investors: Watch for further developments in key indicators such as growth in data centers and new deals with major customers.

If you $MRVL maintains its upward trend, it could still be an interesting investment over the next 3-5 years, especially given the rapidly growing demand for AI infrastructure.