Marvell Technology Emerges as a Key Player in AI Infrastructure Market

Meet the Supercharged Growth Stock That Could Make You a Millionaire | The Motley Fool

The next chapter of the artificial intelligence revolution's story will feature lesser-known characters. Most investors know that names like Nvidia and Microsoft were the big winners of the initial advent of artificial intelligence (AI). As time marches on, though, other companies are stepping up to fill the technological gaps exposed by the rise of AI computer processors and AI user interfaces (such as OpenAI's ChatGPT and Microsoft's Copilot). In some cases, it's the first time many investors are even hearing of these organizations. Marvell Technology (MRVL 3.64%) is not a name many investors are familiar with. However, it's an outfit the artificial intelligence industry is increasingly depending on, since the business can't continue to improve and grow without this organization's tech. Never heard of it? Most investors probably haven't. Its $100 billion market cap doesn't turn a lot of heads. However, it's not a stretch to suggest that Marvell Technology stock could soon be delivering Nvidia-like gains. Its wares are that important to AI data centers. No, it doesn't make artificial intelligence processors -- at least, not the ones you hear so much about, such as Nvidia's Grace CPU (central processing unit), which is currently serving as the workhorse for many AI data centers. Rather, Marvell Technology makes a wide range of high-performance silicon that attaches to -- and connects -- all the servers you'll find tethered together to make a wall of tech found inside a data center. Digital signal processors (or DSPs), switches, ethernet controllers, hard drive connectors, and custom-built ASIC chips meant to meet very specific lower-spec needs are all in its wheelhouse. As an example, its recently unveiled Aquila digital signal processors can handle 1.6 trillion bits of digital data per second. Boring? Perhaps a little. But don't mistake boring for slow-moving. While economic headwinds will keep this company's top-line growth to a minimum this year, it should rebound in earnest next year. Analysts are calling for revenue growth of more than 40% in 2025. That's still just the beginning. Technology market research outfit IDC predicts that today's $32 billion AI infrastructure market is set to swell to over $100 billion annually within the next five years. Separately but simultaneously, Straits Research believes the AI infrastructure business is going to grow at an average annualized pace of 20.7% through 2032. Marvell is expected to capture at least its fair share of this growth, driving profits up at an even faster clip than its revenue is likely to grow at during this stretch. Convinced? Good. Just don't be too quick to plow into this ticker. There's time and reason to wait before diving in. Generally speaking, trying to perfectly time your trades' entries and exits is a bad idea, often doing more harm than good. The best time to buy a quality stock is usually when you have the money available to do so. The right time to sell a stock is when it no longer offers enough reward relative to its risk, or when the underlying company no longer meets your need. There are occasional instances, however, when it makes sense to give yourself a bit of an edge by being patient. This is one of those times. Marvell Technology shares soared more than 200% from their 2023 low, with half of that gain materializing just since the middle of this year. That's a tough act to follow. Shares are also valued frothily at more than 70 times the current fiscal year's projected per-share profits of $1.56. Although they're priced below analysts' current consensus price target of $120.88, at around $113, they're not exactly miles below that mark. Just don't get too stingy if you're going to play the waiting game. Earnings are expected to soar nearly 80% to $2.76 per share next fiscal year on the heels of the AI infrastructure market's rekindled growth. This sort of impending growth pace can readily override the drag of being richly priced. This might help: Even though the stock's currently trading just a tad under analysts' consensus target, the vast majority of the analyst crowd still rates Marvell Technology a strong buy. Is there enough potential on the table for this stock to turn you into a millionaire? Obviously this is mostly a function of how much money you choose to invest in the company. Committing $1,000 to a stake in Marvell today won't get you to the seven-figure mark at any point in your lifetime. Buying $100,000 worth of Marvell Technology shares today, however, could be a different story. There's certainly enough long-term potential here to turn this ticker into a ten-bagger within the foreseeable future. Again, the artificial intelligence infrastructure market is set to triple in size over the course of the coming three years, and more than quintuple in size longer-term, in step with ever-growing demand for AI-powered solutions. But whether or not Marvell Technology ever makes you a millionaire is beside the point. It's a great growth prospect for any amount of money you might be able to invest in it... if growth is your current priority, and if you can stomach the above-average risk it brings to the table. Any decent-sized dip from here is a buying opportunity.

Should You Forget Nvidia and Buy This Tech Stock Instead? | The Motley Fool

There's no denying that technology powerhouse Nvidia (NVDA -2.25%) has been the centerpiece of the artificial intelligence (AI) movement thus far. Its processors are the heart and soul of most data centers. Its stock has beaten the daylights out of the overall market since early 2023, when the artificial intelligence revolution reached its full stride. Shares are up more than 800% during this two-year span, versus the S&P 500's 58% advance for the same timeframe. However, as is always the case, things change. Competition creeps in. Technology evolves. Customers begin thinking about more specific solutions to their unique challenges, and investors' euphoric interest in an industry leader's stock fades. Anyone considering stepping into -- or holding on to -- a stake in Nvidia might want to instead consider one of the technology industry's other top growth prospects: Marvell Technology (MRVL 10.79%). Not familiar with it? You're not alone. Its sub-$100 billion market capitalization just doesn't turn many heads, particularly compared to Nvidia's $3 trillion market value. Marvell also hasn't exactly caught the eye of many hedge funds and money managers that often have their finger on the pulse of the proverbial "next big thing." Of The Motley Fool's recent look at 16 different billionaires' hedge fund holdings, the company wasn't a major position for any of them -- but maybe it should be. Marvell isn't a top-of-mind name for investors on the hunt for a new way to plug into the artificial intelligence movement. It's quietly been there all along, though. This company makes everything from data center switches to hard drive controllers to the computer processors you don't hear much about, but would certainly notice if they didn't exist. Its tech is found in 5G connectivity equipment, automobiles, and, perhaps most notably, AI data centers that increasingly need entire walls of motherboards to work together as a single, massive digital brain. Earlier this week, for instance, the company unveiled its new Aquila DSP (digital signal processor), which is capable of handling 1.6 trillion bits of digital data every second. This power-efficient technology can be used in densely packed data centers with up to 20 kilometers' worth of connectivity wiring. That's why technology market research outfit Dell'Oro Group thinks the market for this new type of data center processor will grow at an average annual clip of 200% over the course of the coming five years. That's just one of the kinds of technologies Marvell makes. Also earlier this week, the company announced a design breakthrough for high-bandwidth memory (or HBM) modules. This solution should provide AI platforms with 25% more computing power than comparable systems currently do, without taking up any additional space. Mordor Intelligence believes this better-developed global HBM market is set to grow at an annualized pace of nearly 26% through 2029. Nvidia's processors are workhorses, to be sure. If artificial intelligence is going to begin its next chapter, though, the tech these AI processors are attached to will also need to be next-generation stuff. Marvell Technology is leading this low-profile charge. For better or worse, Marvell's growth prospects are increasingly being reflected in the stock's price. Shares are up more than 200% since the end of 2022, with roughly half of that gain materializing just since the middle of this year as its research and development efforts -- along with the need for them -- took center stage. The big run-up seems like a tough act to follow, leaving shares priced at a frothy 40 times next fiscal year's projected per-share profits of $2.76. This is arguably one of those cases, however, where any decent dip is a buying opportunity. While such a valuation is seemingly sky-high compared to the overall market, that's not how storied growth stocks trade these days. Such stocks can sustain and even add to a steep premium based not on next year's likely earnings, but rather, the company's plausible profit five years and even 10 years down the road. There's little doubt that Marvell Technology is well-positioned to capture at least its fair share of the AI technology market's foreseeable growth. As Benchmark analyst Cody Acree explained of his recent increase in the firm's target price for the stock, "Marvell is one of only two custom silicon suppliers that provide NVDA GPU competitive accelerators to three of the industry's largest hyperscale data center companies, with Amazon and Google having contracted Marvell to co-develop custom accelerators uniquely tailored to serve their specific AI workloads." Acree adds to his bullish thesis: "After years of engagement, development, and qualification, these processors are currently ramping with volume production revenue, which when combined with its strong ramp in Optical Connectivity, Marvell is said to be on pace to 'well-exceed' its FY25 and FY26 targets for AI to earn $1.5 billion and $2.5 billion, respectively." He's hardly the only bull. The vast majority of the analyst community still rates Marvell stock as a strong buy, despite its recent enormous gains. Will billionaires, hedge funds, and other institutional stock-pickers ever get on board and add Marvell Technology to their portfolios? Maybe. Or maybe not. Nobody knows for sure. Don't be dissuaded just because Marvell isn't currently a favorite among the proverbial "big money" tier of investors. Plenty of these in-the-know investors weren't exactly on board with Nvidia when it first started to roar, either. It can take time for this crowd to find a new darling, and then convince themselves to dive in. If you like the underlying story and the stock's long-term risk-versus-reward scenario, go ahead and buy now -- even near its recently reached record peak.

Better Artificial Intelligence Stock: AMD vs. Marvell Technology | The Motley Fool

More specifically, AMD stock's decline of 13% this year pales in comparison to the impressive 76% surge in Marvell's shares. Both companies are benefiting from the growing demand for chips to power artificial intelligence (AI). So, will Marvell remain the better AI stock of the two in 2025 as well? Or can AMD turn its fortunes around in the new year and outperform Marvell? Let's find out. AMD has been playing second fiddle to Nvidia in the market for AI data center graphics processing units (GPUs). Even so, the company's data center business has been growing at an impressive pace. In the third quarter of 2024, for instance, AMD's data center revenue increased 122% year over year to a record $3.5 billion. Management says that this impressive growth was driven by the strong demand for its data center GPUs and CPUs (central processing units). The company now expects to finish the year with $5 billion in data center GPU revenue, which would be a massive improvement from the $400 million revenue it generated from sales of these chips in the fourth quarter of 2023. Moreover, the company has kept increasing its data center GPU guidance throughout the year, starting from $2 billion at the beginning of the year. AMD is finding success in other related niches as well, such as AI-enabled personal computers (PCs). This explains why the company's revenue from its client segment, which includes sales of CPUs used in desktops and notebooks, increased by an impressive 29% year over year in the third quarter to $1.9 billion. These two segments together produced 80% of AMD's third-quarter top line, and their solid growth allowed the company to offset the weakness in other areas such as gaming and embedded chips. The company's overall revenue increased by 18% from the year-ago quarter to $6.8 billion, while adjusted earnings were up by 31% to $0.92 per share. AMD's guidance for the current quarter is also solid. The company expects its year-over-year top-line growth to accelerate to 22% in the fourth quarter. Analysts forecast AMD to exit 2024 with a 13% increase in revenue to $25.6 billion, along with a 25% jump in earnings to $3.32 per share. The next year, however, is going to be much stronger for AMD as per consensus expectations. Its revenue is expected to jump nearly 27%, while earnings are forecast to increase by 54%. It is easy to see why analysts are expecting AMD's growth to accelerate significantly next year. First, shipments of AI-enabled PCs are expected to increase by 165% in 2025, according to Gartner. That would be a major improvement over the 100% growth expected for 2024. AMD is well positioned to capitalize on this market's growth, according to its third-quarter earnings call, where it said PC makers such as HP and Lenovo "are on track to more than triple the number of Ryzen AI Pro platforms they offer in 2024, and we expect to have more than 100 Ryzen AI Pro commercial platforms in [the] market next year." Meanwhile, AMD could also benefit from an improvement in the output of AI GPUs by foundry partner TSMC in 2025. The Taiwan-based foundry giant is expected to double in 2025, and it is also expected to use its Arizona fab to make AMD's upcoming AI accelerators. So, there is a good chance that the company's fortunes in the stock market could turn around in 2025 thanks to AI. Marvell Technology is a key player in the market for AI-focused application-specific integrated circuits (ASICs), a space that's growing at a terrific pace. And the demand for Marvell's optical equipment is also growing nicely to enable faster connections in, and between, data centers. These catalysts are the reason its data center business has been growing incredibly of late. The chipmaker's data center revenue shot up 98% year over year in the third quarter of fiscal 2025 (which ended on Nov. 2) to $1.1 billion. The remarkable thing to note here is that the data center segment produced 73% of Marvell's revenue last quarter, up from just 39% in the year-ago period. The company's data center growth was so good that it was enough to boost Marvell's overall revenue by 7% year over year despite steep double-digit declines in its four other segments. Management says that the demand for its AI-specific chips is so strong that it is on track to exceed its full-year AI revenue guidance of $1.5 billion by a significant margin. Marvell is forecasting $2.5 billion in the next fiscal year. However, there is a good chance that the chipmaker could generate higher AI revenue next year as well, since it has been expanding its partnerships with major cloud computing providers such as Amazon and has brought an additional customer on board. These catalysts are expected to be so strong that analysts are forecasting a 41% jump in the top line next year to $8.1 billion, along with 77% growth in the bottom line to $2.76 per share. For comparison, the company's revenue is expected to increase by just 4% in the current fiscal year to $1.56 per share, along with a 3% increase in earnings per share. So, there is a strong likelihood of Marvell stock maintaining its red-hot rally in 2025 as well. We have seen that both AMD and Marvell are expected to grow impressively next year. Marvell is expected to grow at a faster pace than AMD, but there are a couple of reasons the latter could turn out to be a better AI pick. First, AMD is cheaper. The stock's sales and forward earnings multiples make it the cheaper stock right now when compared to Marvell. Second, AMD is a more diversified AI stock. The company supplies CPUs and GPUs not only for data centers but also for personal computers, indicating that it may have a larger addressable AI market than Marvell. So, investors looking for an AI stock that can deliver a mix of both value and growth may be tempted to buy AMD over Marvell despite the former's poor stock market performance this year.