Key Takeaways
- Marvell Technology’s high revenue growth contrasts with its recent stock price action, making it an undervalued AI stock.
- The company’s custom AI chip business has steady growth potential, with a recent acquisition of Celestial AI to boost its presence in the AI data center industry.
- Marvell Technology’s valuation hasn’t moved as quickly as its revenue, with a 23.5 forward P/E ratio and impressive year-over-year revenue growth.
- The company has debunked rumors of losing business from Amazon and Microsoft, and its recent acquisition and financial performance suggest a potential rally to all-time highs.
Introduction to Marvell Technology
Marvell Technology is a custom AI chipmaker that has been flying under the radar, despite its impressive revenue growth rates. The company’s stock price has declined by 25% year-to-date, making it an attractive option for investors looking for undervalued AI stocks. Marvell Technology’s revenue growth has steadily outpaced its stock price decline, with the company posting 37% year-over-year revenue growth in the third quarter of its fiscal 2026. This growth is driven by the company’s focus on custom AI chips, which are in high demand from tech giants such as Amazon and Microsoft.
Debunking Rumors and Valuation
Marvell Technology’s stock price took a hit when rumors swirled around that the company lost business from Amazon and Microsoft. However, CEO Matt Murphy has debunked these rumors, stating that the company did not lose any business from these tech giants. Despite this, the rumor continues to weigh on the stock price, presenting an opportunity for long-term investors. Marvell Technology’s valuation hasn’t moved as quickly as its revenue, with a 23.5 forward P/E ratio. The company’s operating income increased by 23% year over year in the third quarter of its fiscal 2026, and its net income margin has been around 10% in previous quarters.
Acquisition and Growth Potential
Marvell Technology’s recent acquisition of Celestial AI, a photonic fabric provider, is expected to boost its presence in the AI data center industry. The $3.25 billion acquisition, which may be valued at $5.5 billion if certain sales objectives are achieved, will help Marvell Technology scale faster in the burgeoning AI data center industry. The deal has been praised by AWS Vice President of Compute and Machine Learning Services Dave Brown, casting further doubt on the rumors that Marvell Technology lost business from Amazon and Microsoft. The acquisition complements Marvell Technology’s AI ambitions nicely, and investors have not yet priced in this reality.
Financial Performance and Future Outlook
Marvell Technology’s financial performance has been impressive, with the company posting 63% and 58% year-over-year revenue growth rates in the first and second quarters of fiscal 2026. The company’s revenue and net income are moving in the right direction, despite its stock price suggesting the opposite. Marvell Technology’s $2.5 billion divestiture of its automotive Ethernet business has given the company more capital and freed up resources to prioritize custom AI chips. The company’s focus on AI chip growth and its recent acquisition suggest a potential rally to all-time highs soon enough. If Marvell Technology continues to post 30%-plus year-over-year revenue growth in fiscal 2027 and beyond, the mismatch between revenue growth and its current valuation will become more difficult to ignore.
Conclusion and Investment Opportunity
Marvell Technology’s high revenue growth, recent acquisition, and debunked rumors make it an attractive investment opportunity for long-term investors. The company’s valuation hasn’t moved as quickly as its revenue, presenting a potential buying opportunity. With its focus on custom AI chips and its recent acquisition, Marvell Technology is well-positioned for future growth. Investors looking for undervalued AI stocks may want to consider Marvell Technology, which has the potential to rally to all-time highs soon enough. As the AI data center industry continues to grow, Marvell Technology’s custom AI chip business is expected to benefit, making it an attractive investment opportunity for those looking to capitalize on the growth of the AI industry.
