Here's Why We're Reiterating Our Price Target and Rating for Marvell
At the company’s 'Accelerated Infrastructure for the AI Era' event, it reaffirmed its competitive position in the AI chip space.
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* We are reiterating our $95 target and One rating on Marvell shares following the company’s “Accelerated Infrastructure for the AI Era” event.
* Management confirmed our view on the impact of AI on its data center and other infrastructure businesses.
* Marvell shared that it now has custom chip programs with Microsoft as well as Amazon and Google.
Yesterday, Marvell MRVL held its “Accelerated Infrastructure for the AI Era” event. We expected it was going to be an upbeat one, and the company did not disappoint as it discussed the expected multi-year impact of AI on its Data Center business. But it also confirmed our thinking that would lead to a pull-through for its other digital infrastructure businesses.
There was also an unexpected announcement for the company’s custom chip business, one that reaffirms its competitive position in the AI chip space. Our reaction to the event is to reiterate our $95 price target and our One rating. We suspect others across Wall Street will be out with similar actions today and early next week.
During the event, Marvell not only shared a top-down view of more than $2 trillion coming over the next decade in Data Center investments due to AI. This suggests we are in the early innings of AI and supports our thinking the coming upgrade cycle led by AI-on-devices will turbocharge the need for not only data center investments but also those for network and carrier infrastructure.
Marvell also said it has won a third custom chip customer. That brings Microsoft MSFT into its customer fold alongside Amazon AMZN and Google (GOOGL). Given the comment that the Google business is ramping today, we suspect this means Marvell is the partner behind the Axiom chips announced earlier this week by Google.
Management expects that business should hit more than $550 million this year, $1.5 billion next year, and $2.5 billion in 2026 as the business between just Amazon and Google ramps.
The Microsoft business, which was excluded from the guidance starts, is slated to begin in 2026 and the longer-term thinking is it will be larger than that for Amazon and Google combined. For context, that business generated ~$200 million last year, essentially a low-single-digit portion of its overall revenue stream.
At the time of publication, TheStreet Pro Portfolio was long MRVL, MSFT, AMZN.
