Despite a recent stock price dip, Marvell Technology is emerging as a potentially undervalued player in the booming artificial intelligence (AI) sector. While more prominent AI stocks like Nvidia and Palantir Technologies garner significant investor attention, Marvell’s strong revenue growth and strategic moves position it for future success, even as it navigates market skepticism.
Key Takeaways
- Marvell Technology’s stock has declined approximately 25% year-to-date, contrasting with its robust revenue growth.
- Rumors of losing business from Amazon and Microsoft have been officially debunked by the company’s CEO.
- Strategic divestitures and acquisitions, including the purchase of Celestial AI, are strengthening Marvell’s focus on high-growth AI chip markets.
- The company’s forward P/E ratio of 23.5 suggests it may be trading at a discount compared to its growth trajectory.
Dispelling Market Doubts
Marvell Technology has experienced a notable stock price decline, largely attributed to unsubstantiated rumors that the company had lost significant business from major tech giants Amazon and Microsoft. Such a development would indeed be detrimental for any AI chipmaker heavily reliant on a few key hyperscale customers. However, Marvell CEO Matt Murphy directly addressed these concerns, reassuring investors that no business was lost with these critical partners. This clarification, though made, has not yet fully translated into a stock price recovery, presenting a potential opportunity for astute investors.
Strong Financial Performance Amidst Stock Volatility
Marvell’s financial performance paints a picture of robust growth that starkly contrasts with its recent stock market performance. In the third quarter of fiscal year 2026, the company reported a 37% year-over-year increase in sales and a 23% rise in operating income. This follows even stronger growth in earlier quarters of fiscal 2026, with revenue increases of 63% and 58% in the first and second quarters, respectively. While the net income figure for the third quarter was influenced by a one-time $2.5 billion sale of its automotive Ethernet business, the company has consistently maintained a net profit margin of around 10% in prior periods. This consistent revenue and income growth suggests that the market may be overlooking Marvell’s fundamental strength.
Strategic Moves Position Marvell for AI Dominance
Beyond dispelling rumors, Marvell has been actively reshaping its business to capitalize on the AI surge. The divestiture of its automotive Ethernet segment not only provided capital but also allowed the company to sharpen its focus on custom AI chips. Furthermore, Marvell’s acquisition of Celestial AI for $3.25 billion (potentially reaching $5.5 billion based on sales targets) is a significant move to enhance its capabilities in the AI data center market. This acquisition has been met with positive reception, including praise from AWS Vice President Dave Brown, further undermining the earlier negative rumors. By trading a slower-growing business for a high-growth one that complements its AI strategy, Marvell is positioning itself for accelerated scaling and increased demand for its AI chips. Investors are encouraged to monitor Marvell’s continued revenue growth, as a sustained upward trend could make its current valuation increasingly difficult to ignore.
Sources
- Marvell Technology Looks Undervalued as Artificial Intelligence Spending Surges, The Motley Fool.
- Marvell Technology Looks Undervalued as Artificial Intelligence Spending Surges, Yahoo Finance.
Founder Dinis Guarda
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