Advanced Micro Devices (AMD 0.76%) and Marvell Technology (MRVL 0.47%) have enjoyed contrasting fortunes on the stock market in 2024, with one of these names delivering stellar gains while the other one is in the red.
More specifically, AMD stock's decline of 13% this year pales in comparison to the impressive 76% surge in Marvell's shares. Both companies are benefiting from the growing demand for chips to power artificial intelligence (AI). So, will Marvell remain the better AI stock of the two in 2025 as well? Or can AMD turn its fortunes around in the new year and outperform Marvell?
Let's find out.
The case for AMD
AMD has been playing second fiddle to Nvidia in the market for AI data center graphics processing units (GPUs). Even so, the company's data center business has been growing at an impressive pace.
In the third quarter of 2024, for instance, AMD's data center revenue increased 122% year over year to a record $3.5 billion.
NASDAQ: AMD
Key Data Points
Management says that this impressive growth was driven by the strong demand for its data center GPUs and CPUs (central processing units). The company now expects to finish the year with $5 billion in data center GPU revenue, which would be a massive improvement from the $400 million revenue it generated from sales of these chips in the fourth quarter of 2023.
Moreover, the company has kept increasing its data center GPU guidance throughout the year, starting from $2 billion at the beginning of the year.
AMD is finding success in other related niches as well, such as AI-enabled personal computers (PCs). This explains why the company's revenue from its client segment, which includes sales of CPUs used in desktops and notebooks, increased by an impressive 29% year over year in the third quarter to $1.9 billion. These two segments together produced 80% of AMD's third-quarter top line, and their solid growth allowed the company to offset the weakness in other areas such as gaming and embedded chips.
The company's overall revenue increased by 18% from the year-ago quarter to $6.8 billion, while adjusted earnings were up by 31% to $0.92 per share. AMD's guidance for the current quarter is also solid. The company expects its year-over-year top-line growth to accelerate to 22% in the fourth quarter. Analysts forecast AMD to exit 2024 with a 13% increase in revenue to $25.6 billion, along with a 25% jump in earnings to $3.32 per share.
The next year, however, is going to be much stronger for AMD as per consensus expectations. Its revenue is expected to jump nearly 27%, while earnings are forecast to increase by 54%.
It is easy to see why analysts are expecting AMD's growth to accelerate significantly next year. First, shipments of AI-enabled PCs are expected to increase by 165% in 2025, according to Gartner. That would be a major improvement over the 100% growth expected for 2024.
AMD is well positioned to capitalize on this market's growth, according to its third-quarter earnings call, where it said PC makers such as HP and Lenovo "are on track to more than triple the number of Ryzen AI Pro platforms they offer in 2024, and we expect to have more than 100 Ryzen AI Pro commercial platforms in [the] market next year."
Meanwhile, AMD could also benefit from an improvement in the output of AI GPUs by foundry partner TSMC in 2025. The Taiwan-based foundry giant is expected to double in 2025, and it is also expected to use its Arizona fab to make AMD's upcoming AI accelerators. So, there is a good chance that the company's fortunes in the stock market could turn around in 2025 thanks to AI.
The case for Marvell Technology
Marvell Technology is a key player in the market for AI-focused application-specific integrated circuits (ASICs), a space that's growing at a terrific pace. And the demand for Marvell's optical equipment is also growing nicely to enable faster connections in, and between, data centers. These catalysts are the reason its data center business has been growing incredibly of late.
NASDAQ: MRVL
Key Data Points
The chipmaker's data center revenue shot up 98% year over year in the third quarter of fiscal 2025 (which ended on Nov. 2) to $1.1 billion. The remarkable thing to note here is that the data center segment produced 73% of Marvell's revenue last quarter, up from just 39% in the year-ago period. The company's data center growth was so good that it was enough to boost Marvell's overall revenue by 7% year over year despite steep double-digit declines in its four other segments.
Management says that the demand for its AI-specific chips is so strong that it is on track to exceed its full-year AI revenue guidance of $1.5 billion by a significant margin. Marvell is forecasting $2.5 billion in the next fiscal year.
However, there is a good chance that the chipmaker could generate higher AI revenue next year as well, since it has been expanding its partnerships with major cloud computing providers such as Amazon and has brought an additional customer on board.
These catalysts are expected to be so strong that analysts are forecasting a 41% jump in the top line next year to $8.1 billion, along with 77% growth in the bottom line to $2.76 per share. For comparison, the company's revenue is expected to increase by just 4% in the current fiscal year to $1.56 per share, along with a 3% increase in earnings per share.
MRVL revenue estimates for next fiscal year; data by YCharts.
So, there is a strong likelihood of Marvell stock maintaining its red-hot rally in 2025 as well.
The verdict
We have seen that both AMD and Marvell are expected to grow impressively next year. Marvell is expected to grow at a faster pace than AMD, but there are a couple of reasons the latter could turn out to be a better AI pick.
First, AMD is cheaper. The stock's sales and forward earnings multiples make it the cheaper stock right now when compared to Marvell.
AMD PE ratio (forward), data by YCharts; PS = price to sales. PE= price to earnings.
Second, AMD is a more diversified AI stock. The company supplies CPUs and GPUs not only for data centers but also for personal computers, indicating that it may have a larger addressable AI market than Marvell.
So, investors looking for an AI stock that can deliver a mix of both value and growth may be tempted to buy AMD over Marvell despite the former's poor stock market performance this year.
