Marvell Technology: Buy, Sell, or Hold?

Company Overview - Marvell Technology's stock surged 83% last year, driven by its growing artificial intelligence (AI) chip business [1] - The company's portfolio includes ASICs used by cloud giants for custom AI accelerators, networking chips, and digital signal processors, alongside less-attractive non-AI segments like broadband, telecom equipment, consumer electronics, and automotive chips [2] - Marvell's AI chip business is booming, while its non-AI segments are in a down-cycle, leading to a high valuation [3] Market Position and Growth - Marvell has a smaller ASIC business compared to Broadcom but benefits from Amazon as a key customer, leveraging Amazon's push for custom chips [4] - The company signed a comprehensive five-year collaboration agreement with Amazon, covering ASICs, optical communications modules, ethernet, and PCIe equipment for AI data centers [5] - Marvell's data center segment grew 98% last quarter, now accounting for 72.6% of revenue, transforming the company into a high-growth AI franchise [7] Innovation and Technology - Marvell unveiled a custom high-bandwidth memory (HBM) interface technology in December, addressing a bottleneck in AI training and inferencing, further solidifying its reputation as an AI innovator [6] Financial Outlook - Marvell's addressable market, including ASICs, switching, interconnect, and storage controller chips, is projected to grow from $21 billion in 2023 to$75 billion by 2028, with market share increasing from 10% to 20% [9] - The company aims to achieve $15 billion in data center revenue by 2028, up from a$4.4 billion run-rate today, with total revenue projected at $19 billion [10] - Assuming a 30$5.7 billion in operating earnings and nearly $5 billion in net income by 2028 [11] Valuation and Investment Considerations - Marvell currently trades at 43 times next year's earnings estimates, reflecting a high valuation [8] - Investors are paying over 20 times 2028 earnings, which may seem high given the uncertainty in the fast-moving AI space [11] - The valuation could be justified if Marvell's AI outlook improves, as rival Broadcom recently raised its AI total addressable market estimate to$60-$90 billion by 2027 [12] Investment Strategy - Marvell may not be the best buy after its 2024 run but could be a hold as long as the AI market continues to grow [13] - Investors should monitor for any slowdown in AI infrastructure buildout, which could lead to a significant pullback [13] - For new investors, Marvell is worth adding to a watchlist, but waiting for a better entry price may be prudent [13]