Semiconductor stocks have delivered decent returns over the past three years, which is evident from the 38% gains clocked by the PHLX Semiconductor Sector index during this period. But not all companies have benefited from the broader surge in the sector.
Marvell Technology (MRVL +7.19%) is one such name. Shares of the chipmaker have remained almost flat during this period, and that's largely due to the recent plunge in its share price. Specifically, Marvell stock is down 44% from the 52-week highs that it hit in late January this year.
The rapid decline in Marvell's stock price in the space of less than three months can be attributed to the ongoing correction in the Nasdaq Composite index, as well as the overall negativity surrounding artificial intelligence (AI) chip stocks in 2025. From the tariff-induced trade war to questions about the huge investments in AI infrastructure to Wall Street's elevated growth expectations, several factors have weighed on Marvell's stock price this year.
However, savvy investors would do well to buy Marvell following the sharp pullback in its stock price this year, as it has the potential to soar impressively over the next three years. Let's look at the reasons why.
Marvell's growth is set to pick up impressively
A big reason Marvell stock has underperformed the semiconductor sector over the past three years is because the weak demand for the company's storage and data center chips weighed on its financial performance. This is evident in the following chart.
MRVL Revenue (TTM) data by YCharts.
As we can see above, Marvell's top line started declining from the beginning of 2023. The good news is that Marvell returned to growth in the recently concluded fiscal 2025 (which ended on Feb. 1). Its revenue increased almost 5% year over year to $5.8 billion. Earnings also increased by 4% in fiscal 2025. Importantly, Marvell's growth is set to accelerate remarkably from the current fiscal year.
The company is expecting earnings of $0.61 per share in the first quarter of fiscal 2026 on revenue of $1.88 billion. Those numbers would translate into a year-over-year increase of 154% in earnings and a 62% jump in revenue. This massive turnaround in Marvell's fortunes can be attributed to the outstanding demand for its custom AI processors and networking chips.
The company sold more than $1.5 billion worth of AI chips in fiscal 2025. It expects to blow past its $2.5 billion AI revenue guidance in the current fiscal year, as two of its customers for custom AI chips are ramping up demand at an incredible pace. Looking ahead, Marvell is expecting further growth in business from these two cloud hyperscale customers that are deploying its custom chips in data centers to tackle AI workloads.
That's not surprising, as one of Marvell's key AI customers -- Amazon -- expanded its relationship with the chipmaker in December last year. The two companies are now engaged in a five-year agreement under which Marvell will supply multiple products, including custom AI processors and networking chips, for Amazon's data centers.
Additionally, Marvell management remarked on the latest earnings conference call that it is "making tremendous progress with the new design win announced at our AI Day in April 2024 for a custom AI XPU with an additional U.S. hyperscale." The chipmaker expects to start making chips for this new customer next year, which suggests that its AI revenue is likely to continue increasing at an incredible pace.
NASDAQ: MRVL
Key Data Points
The data center business could boom over the next three years
Marvell's peer Broadcom sees a serviceable addressable market (SAM) worth a whopping $60 billion to $90 billion for custom AI processors and networking chips over the next three years from the three cloud hyperscale customers that it's currently serving. What's more, Broadcom points out that it is working with another four hyperscale customers to develop custom AI chips, indicating that the size of this market could be much higher in the long run.
Marvell is the second-largest player in the custom processor market after Broadcom, with an estimated market share of 13%. However, the company is reportedly looking to bump up its share to 20%. That seems quite achievable, considering that it has recently expanded its relationship with a key customer and is set to begin shipments to a new customer in 2026.
Assuming that the company manages to corner even a 15% share of the custom AI chip market over the next three years, its AI revenue could jump to $9 billion (based on the lower end of Broadcom's SAM forecast of $60 billion after three years). That would be six times the AI revenue that it generated last year.
Not surprisingly, analysts are expecting a significant spike in Marvell's revenue from the current fiscal year, which has just begun. Even better, they are expecting its strong growth to continue over the next three years.
MRVL Revenue Estimates for Current Fiscal Year data by YCharts.
Marvell has a five-year average price-to-sales multiple of 9.4. Assuming it maintains the same multiple after three years, its market capitalization could jump to $112 billion. That points toward a potential jump of 87% in its stock price. Given that Marvell is currently trading at 10.5 times sales, it isn't too expensive to buy right now when compared to the U.S. technology sector's price-to-sales ratio of 7.
Moreover, Marvell's growth is set to accelerate rapidly from the current fiscal year. That means that investors are getting a good deal on this AI stock that they should consider grabbing with both hands before it flies higher over the next three years.
