Marvell Technologies (MRVL 4.18%) has emerged as a beneficiary of the artificial intelligence (AI) revolution. Founded in 1995 and going public in 2000, Marvell quickly established a reputation as a leader in disk drive readers and networking controllers. But after activist investor Starboard Value became involved in 2016 and installed Matt Murphy as CEO, the company embarked on an acquisition strategy to build a comprehensive portfolio of data communications solutions.
Those who bet on Murphy and his acquisition strategy early on have been rewarded substantially over the past five years.
A 171% gain
Starting in 2018 and ending in 2021, the company made five substantial acquisitions: Cavium, Avera Semi, Aquantia, Inphi, and Innovium. This gave Marvell a substantial portfolio of data center networking solutions.
These appear to have been prescient, as artificial intelligence applications have substantial networking needs. Moreover, the Avera and Aquantia acquisitions got Marvell into the custom ASIC (application-specific integrated chip) space. This is also important for AI, as cloud giants seeking to design their own in-house AI chips need to use third-party ASIC technology for part of the chip, which Marvell provides.
Murphy's moves ahead of the AI revolution have rewarded shareholders. Had you invested in Marvell five years ago, you would now be sitting on a 171% gain, including dividends, good for a 22.1% average annualized gain.
MRVL 5 Year Total Returns (Daily) data by YCharts.
Those gains may be underwhelming against Marvell's peers
While these five-year gains are no doubt impressive, they're less so when compared to Marvell's direct peers in the semiconductor industry. The chip sector has been the best-performing sector over the past decade, and early 2019 was an especially favorable time to invest as the industry was coming out of a downturn.
Marvell has been a nice investment but has lagged its sector, as you can see above. Perhaps more importantly, it has lagged behind its most direct competitor Broadcom, which has more than doubled Marvell's total return.
In that sense, Marvell investors may not feel quite as strongly about their market-beating investment.
