Shares of connectivity and custom chipmaker Marvell Technology (MRVL +5.34%) rallied on Monday, rising 6.2% as of 1:30 p.m. EDT.
Marvell benefited from a sectorwide increase in semiconductor stocks today, following OpenAI's announcement that it is committing to a massive 4.25-gigawatt data center in Ohio. For reference, a gigawatt of compute costs between $38 billion and $60 billion in spending, with much of that going toward chips, memory, and networking. The new announcement once again seemed to raise the bar for AI compute demand, lifting several U.S. semiconductor companies in the AI ecosystem, including Marvell.
However, another factor lifting Marvell was two bullish notes from Wall Street analysts, with positive company-specific commentary ahead of Marvell's earnings report next week.
NASDAQ: MRVL
Key Data Points
UBS and GF Securities give Marvell the thumbs-up
Today, two different sell-side analysts wrote positively about Marvell. First, UBS (UBS -0.02%) analyst Timothy Arcuri wrote about several incremental positives for Marvell ahead of its upcoming earnings report on Aug. 27.
Arcuri flagged the increased capital expenditure plans from the big hyperscalers as incrementally positive for Marvell. Furthermore, Arcuri's recent channel checks point to strength in Nvidia (NVDA +0.18%) Blackwell systems and the ramp of the newer Rubin systems, which feature Marvell optical networking content. Arcuri also said investors may be short-changing Marvell's custom ASIC business, in which it produces part of the silicon for custom chips designed by the big hyperscalers. Specifically, Arcuri believes Marvell's business with Microsoft (MSFT -2.82%) for its Maia custom AI chips may be larger than expected over the next couple of years.
Marvell's optical networking business also received another shout-out from GF Securities analyst Alicia Yap. Yap referenced last Friday's unveiling of Nvidia's Spectrum-X CPO (co-packaged optics) switches, which apparently entered mass production that same day. Although Marvell doesn't appear to have any content specifically in the Spectrum-X CPO switch, it does help connect custom hyperscaler ASICs to Nvidia's NVLink technology. Additionally, the industry's broader transition to co-packaged optics should help Marvell with other customers, given its strong optical connectivity business. Marvell also counts Amazon (AMZN -0.88%) Trainium as a custom ASIC customer and, in May, landed an investment from Nvidia to link custom ASICs with Nvidia NVLink technology.
Image source: Getty Images.
Marvell has tailwinds, but the stock doesn't look cheap
Marvell got a nice lift today, driven by real tailwinds in the AI networking space. However, the stock currently trades at roughly 59 times this year's earnings estimates for the fiscal year ending in January 2027. That doesn't leave much margin of safety for the stock today; however, Marvell seems well-positioned to sustain strong earnings growth as the AI build-out progresses.
