1 Growth Stock Down 43% to Buy Hand Over Fist Right Now

Key Points

• Marvell shares plunged following its latest report, but the pullback is an opportunity.

• Its data center business is booming thanks to AI, and its customer pipeline is improving.

• The stock's current valuation makes it look like a no-brainer buy right now.

• 10 stocks we like better than Marvell Technology ›

This has been a terrible year for investors in Marvell Technology (NASDAQ: MRVL) as shares of the chip designer have slipped 43% in 2025. However, that steep decline doesn't seem justified considering the rapid pace at which the company's revenue and earnings have been increasing.

The stock took another hit following the release of its fiscal 2026 second-quarter results (for the three months ended Aug. 2) on Aug. 28. Marvell crashed nearly 19% following its latest quarterly report. Let's see why that was the case.

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Investors were spooked by Marvell's guidance

Marvell is known for manufacturing application-specific integrated circuits (ASICs). These are programmable chips that can be customized to perform specific tasks, unlike graphics processing units (GPUs), which are general-purpose computing chips. The specific nature of ASICs allows them to carry out the tasks they are designed for with high efficiency and speed.

As such, these chips are being used in artificial intelligence (AI) data centers, helping Marvell achieve excellent growth from this segment. The company reported a year-over-year increase of 58% in its revenue last quarter to just over $2 billion. And its adjusted earnings more than doubled year over year to $0.67 per share.

The data center business played a central role in driving such outstanding growth, accounting for almost three-fourths of Marvell's revenue last quarter. What's more, the company saw strong increases in its other businesses -- enterprise networking, carrier infrastructure, and its consumer segment -- as well. These segments were not in good shape a year ago, so their return to growth is good news for investors.

However, the market was focused on the company's data center forecast, since this segment is the biggest factor driving Marvell's growth. And that explains why the stock plunged big time after management said that its data center revenue will remain flat in the current quarter as compared to the second quarter.

Also, the revenue estimate of $2.06 billion for the ongoing quarter was slightly short of Wall Street's expectations. However, investors seem to be missing the bigger picture.

The company's outstanding growth could be here to stay

Management said on the earnings conference call that it expects its custom AI processor business to grow in a nonlinear manner, depending on the rollout of AI infrastructure by its clients. The company has been supplying its custom AI chips to the leading cloud computing companies, and it is forecasting an improvement in its customer base.

According to CEO Matt Murphy, "Our custom AI design activity is at an all-time high, with the Marvell team now engaged in over 50 new opportunities across more than 10 customers."

Murphy added that these new wins represent multibillion-dollar lifetime revenue potential, and they should enable the company to capture a bigger share of the $55 billion custom AI chip opportunity that it is estimating by 2028. So, Marvell seems well placed to sustain its healthy growth momentum in the long run.

Moreover, the company's guidance for the current quarter wasn't poor, either. Its projected revenue of just over $2 billion would translate into a 35% year-over-year jump. Adjusted earnings are forecast to increase by 74%. So, Marvell's sell-off seems more like a nitpicking exercise, especially considering that the company believes that its growth will be "substantially stronger" than in the third quarter.

Throw in the company's very cheap price-to-earnings ratio of 22, and it becomes easier to see why buying this growth stock is a no-brainer. Marvell has been registering remarkable increases in its top and bottom lines, and it can sustain the same thanks to its lucrative addressable market and an improving customer pipeline.

So, investors looking to add a beaten-down stock that could be a long-term winner should consider capitalizing on Marvell's recent dip as it may not be long before it starts soaring on account of its strong growth.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.