Marvell (MRVL) Keeps Irons in the AI Fire Amid Mixed Outlook

Marvell Technology, Inc. (NASDAQ:MRVL) is a Must-Watch AI Stock on Wall Street. On August 29, Evercore ISI analyst Mark Lipacis lowered the price target on the stock to $122.00 (from $133.00) while maintaining an Outperform rating.

The rating update follows Marvell’s quarterly earnings report that met expectations and earnings per share guidance which was slightly above consensus for the October quarter.

Regardless, Marvell’s shares fell after hours because of its outlook for Custom AI revenue, which the firm estimates, will decline by 18% in the October quarter. This projection has surprised investors amid the strong Cloud CapEx environment.

“While MRVL posted a JulQ meet and an OctQ EPS outlook that is $0.01 above consensus, its stock traded down by 11% in aftermarket trading after providing an outlook for its Custom AI revs to decline QQ in the OctQ, we estimate by 18%. The 18% decline is disappointing against the backdrop of the strongest Cloud CapEx environment on record, however, we think it’s worth considering that 1) MRVL’s custom compute business is nascent with a concentrated customer base, which can be lumpy, and 2) we model that custom IA business to revert back to the trendline in the Jan-26Q. We believe that the company has about 20 custom design wins, which will ramp over the next 1-to-2 years, and the company reiterated its plan to grow its DC share to 20% of a $94bn TAM in CY28.”

The firm believes that the stock may fall flat in the near-term as investors wait out to see how the custom chip business is doing. However, a P/E ratio of 21 seems attractive for an AI chip company with “a number of irons in the AI fire”.

Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors, focusing heavily on data centers.

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