Shares of Marvell (NASDAQ:MRVL | MRVL Price Prediction) have really been put on the map after enjoying a parabolic move since the start of March. With shares up a whopping 96% in three months, questions linger as to whether the $138 billion company has what it takes to be the new king of custom silicon. Indeed, some may view the company as an alternative to Broadcom (NASDAQ:AVGO). And while there are many similarities, I do think that Marvell is a different beast entirely.
After inking a handful of deals with mega-cap tech, most recently winning business from Google, whose parent company is Alphabet (NASDAQ:GOOG), for work on a next-generation TPU (tensor processing unit), Marvell suddenly went from a relatively small up-and-comer in XPUs to a rising star that might actually have what it takes to join the league of the mega-cap tech titans aiming to harness the full power of the inference inflection point.
If inference is due for a boom as AI agents look to run around the clock while hyperscalers become more than willing to spend more to secure their silicon dependence, maybe there’s still more room for Marvell to run. Of course, a parabolic move should inspire caution, rather than euphoria, especially since the secret is out and investors now know what the firm is capable of as the AI narrative enters its next phase.
In any case, the Google deal strengthens an already strong Marvell narrative. The big question, in my view, is how much the mega-cap tech titans could expand upon their deals in the future. Marvell is quickly becoming a household name, and its credibility as a custom silicon partner has skyrocketed alongside the shares.
Marvell is doing nearly everything right
The ASIC race was dominated by Broadcom earlier on, but in recent quarters, Marvell has really risen to the occasion. While there is quite a bit of overlap between the two custom silicon juggernauts, I do think that Marvell is going down a very exciting pathway, as the firm looks to help the big AI spenders break through the bottlenecks holding them back.
Whether we’re talking about optical networking (there’s been a lot of buzz surrounding photonic connectivity in recent months) and the company’s impressive 1.6 terabit hardware, innovations to improve memory efficiencies (think techniques like memory pooling), or something else, Marvell brings a lot of differentiation to the table. And for the Mag Seven titans, it only makes sense, at least in my view, to team up with the firm to tackle complex problems that stand to get in the way of the AI advancement curve.
As the tech titans race ahead and CapEx budgets potentially look to swell further, they’re going to need firms like Marvell to roll up their sleeves to help get the infrastructure where it needs to be. In essence, Marvell’s a second-derivative infrastructure play that’s finally starting to get recognition, and it’s becoming too expensive, especially for the heavier AI spenders, to ignore the firm and the value it brings to the table.
The stock is getting pricier, though
The big question for investors, though, is whether or not that valuation still makes sense now that investors have had ample opportunity to punch their ticket. At 51.2 times trailing price-to-earnings (P/E), shares do not look cheap.
But do recent developments, which bolster the fundamental picture, make the premium worth paying for?
Many analysts are sticking with Marvell after a heated run. Rick Schafer of Oppenheimer still has the names as top picks, with a price target of $170.00 per share. That’s another 8% or so worth of upside from here.
Despite analyst enthusiasm, I’d say that even if the run isn’t over, the reward isn’t rich enough to compensate for the risks after a parabolic surge. As such, I’d be more inclined to wait for a pullback or cool-off period before considering initiating a position.
So, in my view, there’s a lot to love about Marvell right here, except the valuation.
Top Gaining Stocks
Top Losing Stocks