Marvell: The Next Trillion Dollar AI Stock
What Does Marvell Do?
Marvell Technology (MRVL) is a leading AI infrastructure company that powers the backend of AI data centers. To train AI models, thousands of GPUs are grouped together. Moving data between these GPUs is critical. Marvell provides the connectivity and optics solutions to ensure that massive amounts of data can fly through fiber optic cables at blistering speeds. Additionally, Marvell provides custom-designed chips for hyperscalers like Amazon (AMZN) and Alphabet (GOOGL). The custom-designed chips are tailored specifically to the big cloud provider’s data centers, helping them to save on power costs.
Marvell: An AI Beneficiary
AI has been the fastest and most predictable growth industry on Wall Street. Marvell is already delivering record earnings numbers, but Wall Street analysts see the growth only just beginning. Zacks Consensus Estimates suggest that MRVL will achieve top-and-bottom-line growth of 40% or more through 2028.
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The Next Trillion Dollar Company
A few months ago, Marvell CEO Matt Murphy gave the keynote speech at the Computex tech trade show in Taipei. Prior to Murphy’s speech, NVIDIA’s (NVDA) iconic CEO explained why Marvell will be the next trillion-dollar company:
“When you take a computing problem, and you disaggregate it into a lot of parts, and you distribute across the data center, what’s necessary is connectivity. That’s the reason why Matt’s doing so well. That’s the reason Marvell is so essential. That’s why you’re going to be the next trillion-dollar company.”
Because Jensen Huang is CEO of the most important AI company and has visibility into the industry that no one else has, he’s worth listening to. Meanwhile, Marvell and NVIDIA recently expanded their relationship which should help to shorten adoption cycles, and broaden Marvell’s addressable opportunities across AI infrastructure builds.
MRVL Follow the Trend
“The trend is your friend until the end when it bends.” ~ Ed Seykota
Marvell has been one of the best-performing stocks over the past year, gaining 163% versus the S&P 500’s 20%.
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One of the best ways for intermediate investors to gauge the trend is to follow the 10-week moving average. MRVL shares are retreating to the 10-week moving average for the first time since March. The first retreat to the 10-week moving average after a major breakout offers an extremely favorable reward-to-risk zone.
Image Source: TradingView
Bottom Line
While NVIDIA supplies the AI brains, Marvell builds the nervous system. Regardless of who wins the AI software or hardware wars, the entire AI ecosystem fundamentally requires Marvell’s specialized connectivity and custom architecture to function.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
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This article originally published on Zacks Investment Research (zacks.com).
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