Marvell Shares Drop 15% Amid AI Growth Concerns

Marvell Technology forecasted its first-quarter revenue in line with Wall Street estimates on Wednesday. However, its stock price plummeted by 15% in after-hours trading due to investor concerns that it had failed to meet expectations for stronger AI-driven growth.

The demand for AI chips and the resulting shortages have led to higher prices for NVIDIA's AI processors. As a result, tech giants like Microsoft, Meta Platforms, and Amazon are developing their own AI processors to reduce reliance on NVIDIA. This shift has also benefitted other chipmakers like Marvell and Broadcom.

Thanks to the surge in demand for custom AI chips, Marvell's data center division saw a 78% year-over-year revenue increase in Q4, reaching $1.37 billion.

Tore Svanberg, an analyst at Stifel Nicolaus & Co., commented, “The earnings report was generally positive, but given the optimism surrounding the AI sector and the acceleration of custom ASIC (AI chip) development with some large-scale enterprises, investors were expecting even more.”

Marvell reaffirmed its strategy of focusing its investments on data centers to “fully capitalize on” the AI boom. Data center revenue now accounts for 75% of the company's quarterly total revenue.

CFRA Research's analyst Angelo Zino noted, “Despite strong performance, the stock's significant drop may stem from concerns over the magnitude of earnings beats, geopolitical pressures, and broader worries about AI commercialization.”

On March 3, Marvell unveiled its first 2nm silicon IP for next-generation AI and cloud infrastructure. The chip will be manufactured using TSMC's 2nm process and will be part of the Marvell platform, designed to help cloud service providers enhance the performance, efficiency, and economic potential of their global operations through custom XPUs, switches, and other technologies.

Marvell anticipates that custom chips will account for around 25% of the accelerated computing chip market by 2028, driven by an expected 45% annual growth in its total addressable market (TAM).