Marvell Technology (NASDAQ:MRVL | MRVL Price Prediction) and Broadcom (NASDAQ:AVGO) are both major winners of the AI rally. Both of these companies specialize in data center components, and both have a custom AI focus with application-specific integrated circuits (ASICs) that hyperscalers use for AI training and inference.
Marvell has historically lagged Broadcom, but it is the cheaper of the two. The size difference between these stocks is also enormous, and there’s plenty more to keep in mind before you make the choice about which stock to buy. I’d even call one a trap, and the other a winner. But first, let’s take a look at the specifics.
What Marvell gets you
Marvell is a more niche semiconductor company, as the market capitalization is just a hair above $90 billion. The stock also hasn’t grown too fast, at least not when you compare it to most other semiconductor companies. It is up just 20% or so more than where it was during its peak in 2021. The company sells specialized system-on-chip (SoC) solutions, processors, interconnects, and networking components that move, process, and store massive amounts of data efficiently.
The range of components it covers is truly vast. However, the margins here are lower than what Broadcom gets you. It has pivoted successfully from legacy storage-focused chips toward AI-driven data infrastructure. Growth is now tied to AI, and if you are a strong believer in the AI infrastructure buildout, Marvell is worth buying.
Data center revenue (including custom ASICs and optics) now makes up the vast majority of sales.
Growth here is still in a ramp-up phase, with EPS growth expected to be 35% in FY 2027 (ends in January 2027). FY 2028 EPS growth is expected to rise to 42.2%. Revenue growth is expected to follow a similar curve, going form 33% in FY 2027 to 37% in FY 2028.
You’re paying a sensible premium for that growth, at just 26 times forward earnings. The farther out you stretch the earnings horizon, the better of a bargain this stock gets.
What you get with Broadcom
Most investors are already well aware of what Broadcom does. But as a refresher, this company sells networking and infrastructure software like VMware. Broadcom is increasingly being seen as an upcoming competitor to Nvidia (NASDAQ:NVDA) due to its chips being able to more precisely deal with cases. That said, Broadcom is far behind compared to Nvidia’s generality.
AVGO stock trades at a very high premium today at 61 times earnings. This is a bit misleading though, since the expected earnings do make that premium well-deserved.
The forward PE ratio is less than 28 times, and analysts actually expect 63% annual EPS growth in the latter half of this decade. Revenue growth is expected to be 47% annually in the same timeframe. That’s nothing to scoff at and is higher than Marvell’s growth.
Why I think Marvell is a trap
Both of these companies have some trap-like features, but Marvell is a worse trap than Broadcom.
But let’s look at Broadcom’s weakness just to play the devil’s advocate.
Broadcom has accumulated significant debt after its VMware acquisition. You’re looking at over $66 billion of debt against just $14.2 billion of cash. That’s certainly small compared to its market cap of $1.48 trillion, but it can still be a drag as interest rates stay high.
If the AI rally were to slow down and AVGO stock were to retreat, this debt load will look like a bigger and bigger problem. Wall Street tends to heavily discount a $50 billion-plus debt load for slower-growing businesses. During a possible AI lull, Broadcom will have negative growth, low to negative net margins, and a whole lot of debt on its balance sheet.
Marvell’s net debt does not meaningfully push its enterprise value higher, nor does it have to worry about a software slowdown.
What it does have, however, is a more extreme dependence on the AI rally. A slowdown in hyperscaler capex would slam Marvell harder. It does not have a software buffer, nor does it have a broad consumer/industrial/enterprise diversification. Revenue concentration + cyclical hardware margins mean earnings volatility would spike. Marvell’s breadth of products is still in the data center sector and is primed to suffer if and when the buildout slows.
Broadcom gets you stability and scale. The size does cap the upside, but it also caps the downside risk MRVL stock will suffer once the music does stop.
All things considered, AVGO stock is the winner of the two.
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