What Happened?
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) jumped 8.7% in the morning session after the company announced a breakthrough in making chips for Artificial Intelligence (AI), revealing the industry's first 2nm custom Static Random Access Memory (SRAM - tiny computer memory). Think of it as making the brain of AI chips much faster and less power-hungry, which is a huge deal for companies building massive AI systems.
During the Custom AI investor event, Marvell also raised its total addressable market for the data center market to $94 billion by calendar year 2028. This implied a CAGR of 35% from 2023 (vs. previous CAGR est. of 28%).
The bulk of the upside is expected to be captured by demand for accelerated custom compute solutions powered by custom XPUs. Marvell intends to collaborate with hyperscalers on developing the XPUs (specialized AI chips) by delivering critical memory chips, such as Custom SRAM. The recent announcement suggested they will not waste time shipping new products to the market.
Following the announcements, the sentiment leaned more positive on Wall Street as analysts reiterated their bullish ratings while some raised their price targets on the potential for the new product to drive demand and sales. For example, Bank of America raised the stock's price target to $90, which implied a potential 20% upside as they expect long-term consensus EPS estimates (2028) to be much higher.
Is now the time to buy Marvell Technology? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Marvell Technology’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 5.3% as the major indices rebounded (Nasdaq +1.5%, S&P 500 +1.0%) as reports pointed to easing tensions between Israel and Iran.
The Wall Street Journal said senior Iranian officials had signaled a willingness to restart stalled nuclear talks, on the condition that Washington refrain from joining Israel's ongoing strikes. This development triggered a significant decline in oil prices, easing inflation concerns.
Also, it is possible some investors were buying the dip following the sell-off at the end of the previous week.
Marvell Technology is down 34.1% since the beginning of the year, and at $74.88 per share, it is trading 40.6% below its 52-week high of $126.06 from January 2025. Investors who bought $1,000 worth of Marvell Technology’s shares 5 years ago would now be looking at an investment worth $2,171.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
