What Happened?
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) fell 9.2% in the morning session after concerns surfaced about the loss of key custom chip design contracts with major hyperscale cloud providers.
A report indicated that Microsoft is discussing future custom AI chip designs with competitor Broadcom, a role typically associated with Marvell’s custom silicon business. Compounding this fear, a Benchmark analyst downgraded the stock to "Hold" citing a "high degree of conviction" that Marvell has lost Amazon Web Services' (AWS) next-generation Trainium 3 and 4 chip designs to Taiwanese competitor Alchip. Since Marvell's AI-driven growth story is heavily reliant on these custom accelerator (XPU) programs, the potential loss of two critical customers prompted investors to sell, outweighing the generally bullish long-term sentiment from other analysts.
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What Is The Market Telling Us
Marvell Technology’s shares are extremely volatile and have had 43 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 5.2% on the news that investors looked past the company's in-line third-quarter revenue to focus on its better-than-expected profits and strong forward guidance.
For its third quarter, Marvell reported adjusted earnings of $0.76 per share, beating Wall Street's consensus estimates by 3%. Revenue came in at $2.07 billion, matching expectations and representing a 36.8% increase from the same period last year. Looking ahead, the company provided an optimistic outlook, forecasting fourth-quarter revenue of around $2.2 billion and adjusted earnings per share of $0.79, both of which were ahead of analyst predictions. The positive move came after the stock initially fell following the earnings release, suggesting that investors had digested the report and were now focused on the company's solid profitability and encouraging growth trajectory.
Marvell Technology is down 21% since the beginning of the year, and at $89.66 per share, it is trading 28.9% below its 52-week high of $126.06 from January 2025. Investors who bought $1,000 worth of Marvell Technology’s shares 5 years ago would now be looking at an investment worth $2,053.
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