Marvell Technology: A Bull Case Theory

In this article, we’ll summarize a bullish thesis posted on VIC regarding Marvell Technologies in late July when MRVL stock was trading at $63.44. Currently, MRVL stock is trading at $92.78, which is near its 52-week high of $95. So, MRVL stock has gained over 46% since the publication of this thesis. MRVL stock’s forward PE ratio is at 37 and the stock is trading at 15 times trailing twelve-month (TTM) sales.

With a focus on proprietary AI chips and its robust positioning in the AI and data center semiconductor space, the VIC thesis on Marvell Technology (MRVL) from July 2024 underscores a bullish outlook. According to the thesis, Marvell’s relationships with large hyperscalers such as Amazon, Microsoft, and Google position the firm as one of the leading players in developing advanced AI-driven semiconductors. In managing certain workloads, these chips have proven mission critical as Moore’s Law limits additional size cuts in conventional processors. Marvell will likely gain from the growing need for customized chips by these big IT businesses to keep its competitive advantage.

Designed for different hyperscalers, Marvell’s custom ASIC (application-specific integrated circuits) company is expected to scale greatly in 2025 and 2026. AI-specific chips with potential contributions ranging from $3 to $4 in EPS by 2026; this expansion is predicted to propel significant EPS growth, effectively highlighting Marvell’s evolving role as a premium AI chip supplier. Furthermore, Marvell’s leadership in high-end optical DSPs (digital signal processors), vital for data center connectivity, adds to its position in AI-related development sectors. Growing bandwidth needs for artificial intelligence (AI) are expected to drive the expansion of this DSP market; Marvell is positioned to take a major share in this market.

With forecasts of consistent growth through 2025, Marvell is positioned to offer healthy bottom-line growth with a great balance of AI and non-AI businesses. The thesis finally argues that Marvell’s varied growth engines, notable EPS potential from bespoke ASICs, and its relationships with hyperscalers make it an appealing investment with a good long-term horizon.

While acknowledging the potential of MRVL stock as an investment, some other AI stocks hold greater promise for delivering greater returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MRVL but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.