Morningstar

Marvell: With Google Chip Deal, Firm Landing the White Whale

We’ve raised our fair value estimate of Marvell stock.

Signage with logo at the Silicon Valley headquarters of Marvell.
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Securities in This Article
Marvell Technology Inc
(MRVL)

Key Morningstar Metrics for Marvell Technology

  • Fair Value Estimate
    : $270.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

Marvell Technology MRVL and Google announced a commercial agreement for custom chips, including artificial intelligence inference accelerators and other data center chips. Google will receive warrants worth up to 7% of Marvell’s total shares, fully vesting if it spends a cumulative $120 billion through fiscal 2033.

Why it matters: This is another endorsement of Marvell’s custom silicon strategy as it lands a brand-new blue-chip customer. This should greatly expand Marvell’s long-term AI growth opportunity alongside its existing programs at AWS and Microsoft.

  • For Google, this continues the diversification of its silicon suppliers. Broadcom has had a monopoly share in the TPU program, but now MediaTek, Marvell, and perhaps AMD are also stepping in. We’ve expected multi-sourcing and see this as a rapidly growing pie rather than a zero-sum game.
  • Marvell’s custom silicon, or XPU, designs are clearly gaining traction, but we see the firm offering a broader data center portfolio as well. We believe the huge momentum the firm has across partnerships with Nvidia, AWS, Microsoft, and now Google shows it flexing its differentiation.

The bottom line: We raise our fair value estimate for narrow-moat Marvell to $270 per share from $235, as we lift our outer-year growth assumptions to factor in Google revenue, which was previously not in our forecast. Shares rose 6% intraday in a down market and look modestly undervalued.

  • We aren’t concerned with share dilution, given a $120 billion revenue opportunity. We see any amount of execution to this agreement as earnings-accretive. This is also less discounted than AMD’s warrants for OpenAI, which valued stock at par (versus Marvell’s strike price around $207).

Coming up: Marvell reports July-quarter results on Aug. 27. We expect more detail on revenue targets for the Google deal, as well as continued emphatic bullishness from CEO Matt Murphy on the firm’s medium-term growth trajectory. We also expect detail on the firm’s upcoming CFO transition.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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