Marvell Stock An AI Deal After 40% Drop This Year?

August 29th, 2025 by Trefis Team
MRVL: Marvell Technology logo
MRVL
Marvell Technology

Marvell Technology (NASDAQ:MRVL) just delivered a reasonably strong second quarter results, but a cautious outlook for its data center business sent the stock down nearly 12% in after-hours trading on Wednesday. The drop adds to a 30% decline this year, as investors question the company’s place in the fast-moving semiconductor and AI landscape. That said, the recent sell-off has made Marvell look like a potential AI bargain. The stock now trades at about 25x estimated fiscal 2026 earnings and 20x fiscal 2027 earnings. That number looks reasonable considering the company’s solid growth with consensus calling for 43% revenue growth in FY’26 and 19% in FY’27. Now to be sure, an attractive valuation and certainty don’t come together. The key issue is whether those numbers can be trusted, given the volatility in customer orders and the competitive dynamics in AI hardware. To understand if Marvell is really at an attractive entry point for investors, let’s take a look at the risks in its data center business and the opportunities in its expanding AI portfolio.

Some Headwinds

Marvell’s second quarter results showed relatively impressive growth. Net revenue came in at a record $2.0 billion, up 58% compared to the same period last year. Non-GAAP net income was $585.5 million, or $0.67 per diluted share. Data center revenue rose 69% to $1.49 billion, though it fell slightly short of analyst expectations. Despite this strength, management guided for flat sequential revenue from the data center business in the third quarter, with a rebound expected in the fourth quarter. The weak outlook reflects some concerns with Marvell’s custom ASIC business. Management pointed to “lumpiness” in orders from hyperscaler customers, citing the unpredictable nature of demand.

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Some trends that could potentially be driving this include delays in Microsoft (NASDAQ:MSFT) next-generation AI chips. The Maia 200 has been postponed to 2026, while Braga-R and Clea have been pushed back to 2028 or later due to design changes and other challenges. This has raised concerns for Marvell Technology, which supplies critical components for these chips. Additionally, Amazon’s (NASDAQ:AMZN) Amazon Web Services (AWS) has been losing market share to Microsoft Azure and Google Cloud. While AWS remains the largest cloud infrastructure provider by share, its growth rate has slowed compared to Microsoft Azure and Google Cloud. This has created more uncertainty around Marvell’s order pipeline, as AWS also relies on Marvell for its Trainium AI chips. Should You Buy MSFT at $500?

Marvell’s Opportunity

Marvell’s push into the AI market began with its high-speed interconnect solutions for data centers. These optical and electrical interconnects are essential for moving the enormous volumes of data generated by AI and machine learning workloads. Since these workloads rely on massive parallel processing and ultra-fast data transfer, they place heavy demands on existing infrastructure, creating a need for the advanced connectivity technologies that Marvell provides. The bigger growth driver has been application-specific integrated circuits (ASICs) designed for AI. Unlike general-purpose GPUs, ASICs are customized for the requirements of individual customers such as hyperscalers, delivering better cost efficiency, lower power consumption, and superior performance. This could play to Marvell’s advantage in the long-run.

Big tech is in the middle of an unprecedented AI spending spree. Amazon is expected to spend up to $105 billion on capex in 2025, while Microsoft, Alphabet, and Meta are forecast to spend as much as $80 billion, $75 billion, and $72 billion respectively, much of it earmarked for AI infrastructure such as GPUs from Nvidia (NASDAQ:NVDA). However, investors will eventually begin to prioritize returns on AI investments and companies could become more judicious with spending.

Big companies could seek alternatives to Nvidia and Marvell’s specialized models could be a top choice for hyperscalers. Moreover, as AI models grow larger, incremental performance gains may diminish, and the availability of high-quality training data could become a bottleneck. The market could potentially shift from large-scale general-purpose AI models to smaller, specialized ones, potentially helping more niche players like Marvell who offer tailored products that optimize costs and performance for specific applications.

Coming back to the stock, Marvell stock’s relative valuation of about 25x forward earnings appears reasonable compared with Nvidia, which trades at roughly 40x fiscal 2026 earnings. Sure, Nvidia has a more established position in the AI market and its revenue is projected to grow by  more than 50% this year. However, Marvell might still offer investors a more reasonably priced way to gain exposure to AI infrastructure, particularly as demand for customized, power-efficient solutions grows.

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