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This Magnificent Artificial Intelligence (AI) Stock Just Became a Terrific Buy
MRVLMarvell Technology(MRVL) The Motley Fool·2025-03-13 08:15

Core Viewpoint - Marvell Technology's recent fiscal Q4 results showed strong revenue and earnings growth, but the stock experienced a significant sell-off, which may present a buying opportunity for investors focusing on the company's long-term growth potential in the AI chip market [1][4][11]. Financial Performance - Marvell's fiscal Q4 revenue increased by 27% year over year to 1.82billion,withnon−GAAPnetincomerisingby301.82 billion, with non-GAAP net income rising by 30% to 0.60 per share, both exceeding consensus estimates [4]. - The company provided guidance for Q1 revenue at a midpoint of 1.88billion,indicatingayear−over−yearincreaseof621.88 billion, indicating a year-over-year increase of 62%, although it fell short of the higher end of analysts' expectations of 2 billion [4]. - Marvell expects its earnings to jump by 2.5 times year over year in the current quarter to 0.61pershare,reflectingstronggrowthprojections[5].MarketDynamics−Thesell−offinMarvell′sstockappearstobeanoverreaction,asthecompanyiswell−positionedtosustaingrowthdrivenbydemandforapplication−specificintegratedcircuits(ASICs)inAIservers[6].−MajortechcompanieslikeAmazon,Microsoft,andGoogleareincreasinglyusingMarvell′scustomAIprocessorstoreducerelianceonNvidia,highlightingthecompetitiveadvantageofMarvell′sproducts[7].CustomerDemand−Marvell′sAIcustomershavebeenincreasingordersforcustomprocessors,withexpectationsforcontinuedhigh−volumepurchasesduetothelaunchofanewgenerationofprocessors[8].−Thedatacenterbusinesssawanimpressive880.61 per share, reflecting strong growth projections [5]. Market Dynamics - The sell-off in Marvell's stock appears to be an overreaction, as the company is well-positioned to sustain growth driven by demand for application-specific integrated circuits (ASICs) in AI servers [6]. - Major tech companies like Amazon, Microsoft, and Google are increasingly using Marvell's custom AI processors to reduce reliance on Nvidia, highlighting the competitive advantage of Marvell's products [7]. Customer Demand - Marvell's AI customers have been increasing orders for custom processors, with expectations for continued high-volume purchases due to the launch of a new generation of processors [8]. - The data center business saw an impressive 88% revenue increase in fiscal 2025, with AI chip sales significantly exceeding Marvell's estimate of 1.5 billion, contributing to 75% of the company's total revenue last quarter [9]. Future Outlook - Marvell anticipates exceeding its 2.5billiontargetinfiscal2026fromAIchipsales,suggestingpotentialforgrowthbeyondcurrentanalystexpectations[10].−Thecompanyfinishedthelatestfiscalyearwithearningsof2.5 billion target in fiscal 2026 from AI chip sales, suggesting potential for growth beyond current analyst expectations [10]. - The company finished the latest fiscal year with earnings of 1.57 per share, with projections indicating earnings could reach $4.65 per share in three years, potentially leading to a stock price increase of 70% from current levels [12][13].