AI chipmakers have been one of the hottest trades in the stock market. Nvidia (NASDAQ:NVDA | NVDA Price Prediction) and Broadcom (NASDAQ:AVGO) have surged by more than 1,300% and 700%, respectively, over the past five years. However, not all semiconductor stocks were that lucky. Some chipmakers had slow starts or remained undiscovered by investors for several years.
Marvell (NASDAQ:MRVL) is one of the hidden gems that is about to get more spotlight. The custom AI chipmaker’s stock is down by more than 20% year-to-date, but its revenue and earnings have soared during this time. This mismatch, combined with insatiable demand for AI chips, suggests Marvell is an underrated AI stock.
Big Tech Likes Marvell’s Custom AI Chips
Marvell is one of the companies that produces custom AI chips for big tech. These chips can’t handle every task under the sun like Nvidia’s GPUs, but they address specific workloads at a much lower price. Custom AI chips reduce reliance on Nvidia while offering a product that is better in certain scenarios.
Marvell works with Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META). That customer pool offers reliable revenue that is set to expand as AI investments grow. The company has more than 10 customers, but those hyperscalers are the big four.
Some rumors came out that Marvell lost AI chip business from Amazon and Microsoft, but Marvell CEO Matt Murphy denied those rumors a few days later. The rumor mill has been sketchy with AI businesses lately, such as when Oracle (NYSE:ORCL) had to push back on rumors surrounding its OpenAI partnership and data center timelines. Marvell stock is still down from this news, presenting an opportunity for investors who like buying dips.
Marvell Has An Opportunity To Improve Margins
Any growth stock must deliver high revenue growth over the long run to outperform the S&P 500. Marvell’s 37% year-over-year revenue growth in Q3 FY26 shows that it has the potential to beat the market. That growth rate also runs in sharp contrast to the stock’s poor performance in 2025. The mismatch may be remedied in 2026 if revenue growth remains elevated and rumors continue to die down.
High revenue growth serves as a good backdrop, but Marvell has a significant opportunity to increase its margins. The AI chipmaker only delivers profit margins of roughly 10%. Meanwhile, fellow custom AI chipmaker Broadcom’s net profit margin almost touched 50% in the latest quarter. Marvell has made strides with its profit margins, and if it can reach a 20% net profit margin within a few years, its value should soar.
The recent acquisition of Celestial AI can help on both fronts. The addition further positions Marvell as a leader in AI data center infrastructure. As the integration progresses, Marvell has an opportunity to expand its market share while boosting profits.
Marvell Is Getting Lean To Focus More On AI Expansion
Most of Marvell’s long-term opportunities lie in its AI chips. That’s why it was a prudent move for the chipmaker to sell its automotive ethernet business for $2.5 billion. The Celestial AI deal had an upfront cost of $3.25 billion, so the company essentially swapped a business that no longer made sense from a big picture perspective for a business that may be a key part of Marvell’s future.
Selling the automotive ethernet business also lets Marvell invest more capital and resources in data center infrastructure. It may take a few quarters to discover the full benefits of this approach. Investors have the opportunity to accumulate Marvell shares before its full focus on AI translates into higher revenue growth and margin expansion.
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