Shares of Marvell Technology Inc. (NASDAQ: MRVL) spiked over 10% higher on April 9 after the Trump administration announced a 90-day pause on reciprocal tariffs. Additionally, the company announced it had sold its Automotive Ethernet business to Infineon Technologies AG (OTC: IFNNY) for $2.5 billion. However, the stock was back down by more than 7% on April 10 as investors had time to consider what, if anything, had really changed.
Marvell is one of the leading designers and developers of application-specific integrated circuits (ASICs) that are used in applications including cloud computing, wireless communications, and storage solutions. Microsoft Corp. (NASDAQ: MSFT) is one of the company’s largest customers.
The company’s association with the broader semiconductor industry explains why MRVL stock is up over 156% in the last five years. However, as investors are discovering, the chip sector continues to be cyclical and volatile. And with concerns that the AI boom is beginning to bust, how should investors view Marvell stock?
The Billion-Dollar Questions That Hang Over MRVL Stock
Heading into 2025, investors were concerned that slowing growth in the development of AI infrastructure could be the pin that popped the AI bubble. Those concerns accelerated with the Trump administration’s tariff plans.
Marvell has designed plants all around the world, including in many of the countries that are targeted with some of the highest reciprocal tariffs. The pause is helpful but still leaves investors with a cloud of uncertainty. What will a new trade agreement look like, and can one even be reached?
Dan Ives of Wedbush stated frankly, "The AI Revolution trade would be significantly slowed down by these head-scratching tariffs that NEED to be negotiated to realistic levels.” Ives went on to say that it will take considerable time to build manufacturing sites. And that says nothing about the cost of labor in the United States, which Ives believes is unrealistic “to ever have semi-fabs at scale.”
The Infineon Deal Adds Shareholder Value
The Infineon deal will bring in $2.5 billion to Marvell. That's a good value for shareholders, considering that Marvell forecasted the business would generate between $225 million and $250 million in 2025. For perspective, that was about 4% of the company’s total revenue of $5.5 billion in fiscal year 2024.
The company has previously announced an additional $3 billion increase to its stock buyback program while maintaining its dividend at six cents per share, continuing to unlock shareholder value.
Has the Worst Been Priced In?
[content-module:Forecast|NASDAQ: MRVL]Like all technology stocks, Marvell stock has been under pressure since reaching its all-time high in January. But the sell-off has accelerated since the company reported earnings in March. Analysts and investors then became concerned about the company’s guidance. It wasn't that the guidance was weak, but the company left open a range of options, allowing for uncertain market conditions.
That echoes Microsoft's statement that it is cutting back on some of its data center plans in 2025 and beyond due to oversupply concerns. However, the company will still spend over $80 billion on AI infrastructure in 2025. Microsoft will also be less sensitive to tariff pressures. Plus, unlike other competitors in the AI space, Microsoft won’t rely on ad revenue to fund its ambitions.
Data centers are a high-margin business for Marvell, which is why analysts remain bullish on the company. The consensus price target of $120.44 points to a 125% upside. However, investors expecting clarity are likely going to have to wait until the 90-day pause is over. At the very least, they’ll have to wait until Marvell reports earnings in late May.
The stock appears to have found support at its October 2023 low, but MRVL stock is trading far below its 50-day and 200-day simple moving averages. And investors may want to see more momentum before jumping in.
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