One of the hottest chip stocks to own in 2026 has been Marvell Technology (MRVL +5.52%). It helps companies develop custom chips, which have been vital for businesses looking to diversify and become less dependent on Nvidia's high-priced chips. Since the start of the year, Marvell's stock has risen by more than 130%, and it recently hit a new all-time high.
The company recently posted a strong quarter, and its guidance is encouraging, but concerns may be rising about its high valuation. Could Marvell still be a good stock to buy, or has it become too expensive?
Image source: Getty Images.
Why Marvell's growth may continue to accelerate
Last week, Marvell reported its first-quarter earnings for Fiscal 2027. For the period ended May 2, the company's net revenue totaled $2.4 billion, an increase of 28% from a year ago. While that may seem unimpressive for AI investors given how quickly some businesses have been growing, management is optimistic that there's still much more growth to come.
CEO Matt Murphy stated, "We expect revenue growth to continue accelerating each quarter throughout fiscal 2027, driven by continued strength in our data center business." For the current quarter, the company projects that its revenue will be around $2.7 billion, which would represent a year-over-year increase of about 35%. Meanwhile, its partnership with Nvidia and Marvell's products being able to integrate with the rack-scale platform NVLink Fusion should open up even more growth opportunities for the company in the future.
NASDAQ: MRVL
Key Data Points
Are investors paying too big a premium for Marvell's stock?
Marvell has some promising growth opportunities ahead, particularly as it works more closely with Nvidia. But with the tech stock hitting new highs recently, it has become a bit pricey. Currently, it's trading at around 70 times its trailing earnings. And even its forward price-to-earnings multiple, which considers the earnings the business may generate in the year ahead (based on analyst expectations), is still fairly high at more than 50. By comparison, the average S&P 500 stock trades at 26 times trailing earnings, and on a forward earnings basis, that drops to a multiple of 22.
Marvell's stock has been doing exceptionally well this year, but I'd hold off on buying it. While its growth has been impressive, it may not be high enough to justify buying at these levels. At this kind of valuation, you'd be leaving yourself with next to no margin of safety with the stock, which can be risky.
