Marvell Earnings: AI Chip Sales Are Impressive; Concern Over Market Share Loss Is Overblown

Key Morningstar Metrics for Marvell International

• Fair Value Estimate: $90
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Marvell International’s Earnings

Marvell Technology’s MRVL April-quarter results were in line with management guidance, including revenue rising by 63% year over year and 4% sequentially to $1.90 billion. July-quarter guidance calls for sequential growth of 6%, to Marvell’s first-ever quarterly revenue of $2 billion.

Why it matters: Marvell’s artificial intelligence chip sales continue to drive impressive growth. We don’t share market concerns over potential lost business for its custom AI accelerators with Amazon and Microsoft, and retain our long-term confidence in a rapid and long-term growth runway for Marvell’s AI portfolio.

• Marvell is designed into Trainium2 (Amazon) and Maia (Microsoft), and management was adamant about strong placement into follow-on generations (Trainium3 and Maia 2) with both customers, which we believe. We see Marvell’s design prowess allowing it to retain these chip designs.
• We do expect custom accelerators to be multisourced in the long term, given immense customer demand and a desire to avoid vendor lock-in. We believe this may be happening with Amazon and Microsoft, but we don’t expect this to dent Marvell’s growth from these customers.

The bottom line: We maintain our $90 fair value estimate for narrow-moat Marvell, and see our long-term thesis for robust growth from custom silicon and optical chips for data centers and AI intact. Shares look attractive to us.

• Marvell stock is down 50% since late January, with rising concerns over Alchip winning over the Trainium3 socket from Marvell. We believe this is a multisourcing dynamic and think shares reflect overly pessimistic growth assumptions for Marvell’s custom chip business.

Coming up: Marvell is hosting a webinar centered around its custom AI chip business on June 17, which we expect to be a positive catalyst for the stock. We believe further detail on Marvell’s customer engagement and updated addressable market estimates will serve to relieve investor worries.