Marvell Can’t Match Nvidia’s High Bar—But the AI Infrastructure Trade Remains Intact

Marvell Technology shares have nearly tripled this year so far. (Dreamstime)

Key Points

• Marvell Technology boosted its revenue guidance and said its custom chip business is expected to double next year.
• Marvell shares slumped early Friday as investors appeared to lock in profit after a more than 180% gain in the stock so far this year.
• Nvidia is an investor in Marvell, and the two companies collaborate on networking technology.

Nvidia was always going to be a hard act to follow. Earnings from chips-and-networking company Marvell Technology couldn’t meet an extremely high bar set by its bigger peer and its own stellar stock performance but the bigger picture is that the AI infrastructure trade is in rude health.

Marvell did its best. It boosted revenue guidance and said its custom chip business is expected to double next year. But shares were slumping early Friday as investors looked to be locking in profit after a more than 180% gain in the stock this year so far. Nvidia CEO Jensen Huang’s prediction that Marvell would be the next $1 trillion market-cap company seems a way off yet.

Still, a rising tide of spending is lifting all boats—especially those with a cargo of AI chips. Although Marvell’s custom processors are sometimes painted as a threat to the market leader, Nvidia is an investor in the smaller company and they collaborate on networking technology. The more successful Nvidia is in financing the AI buildout, the better it should ultimately be for Marvell.

Of course, it’s not a totally rosy picture. The concern is that such incredible figures from multiple hardware companies is just more evidence of a bubble being inflated, with the risks of a messy collapse heightened by Nvidia’s habit of investing in its partners. But all the evidence so far is that we are still early in the AI boom.

If there are questions about sustainability, they are for the companies spending on chips—think Amazon and Google—rather than the suppliers rushing to meet their demand. Until their shared customers waver, Marvell and Nvidia can be a very successful double act for shareholders.

Write to Adam Clark at adam.clark@barrons.com

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