The Other AI Chipmaker: Why Marvell's Dip Is a Buy

June 12, 2025 at 07:06 AM EDT

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In the race to power artificial intelligence (AI), some of the most essential players operate just outside the spotlight. Marvell Technology (NASDAQ: MRVL) is a prime example.

While its stock trades nearly 46% below its recent highs, the company itself is posting record-breaking financial results. This strange disconnect between Marvell's financial performance and its stock price has created a puzzle for investors.

The answer to solving that puzzle may be one of the best opportunities in today's tech sector.

Marvell’s Clearing Skies: The Reason for the Dip

To see the opportunity in Marvell, you first have to understand why its stock fell. The company’s business includes traditional sectors like enterprise networking and 5G infrastructure. These legacy markets slowed their purchasing of Marvell products as they worked through a backlog of internal inventory. This cyclical downturn served as a significant headwind, affecting Marvell's financial performance and overall growth. This caused concern for some retail investors.

That landscape has now changed for the better. Recent financial reports indicate that the worst of the inventory backlog problem is now behind the company. These legacy segments have returned to modest growth, and with the financial drag fading, the true power of Marvell's core business is coming into focus.

Marvell's AI Blueprint for Success

Marvell’s future is built on the data center. This business segment has grown by approximately 76% year-over-year and now accounts for more than 75% of the company's total sales. This growth comes from Marvell's essential role in building AI infrastructure, a role that is separated into two segments:

Custom-Built AI Engines: Cloud giants are designing proprietary and deeply specialized chips, known as ASICs, to run AI efficiently. They are hiring Marvell to design and build this custom silicon. Marvell has confirmed it has long-term contracts with multiple major partners and has already secured advanced 3-nanometer factory capacity for projects starting in 2026. This strategic pillar establishes a reliable, long-term revenue stream that is tied to its customers' core AI plans.
The Data Center's Nervous System: If GPUs are the brains of an AI cluster, Marvell provides the high-speed nervous system that powers it. The company is a market leader in optical chips that move data at light speed between servers. As AI models become larger, the need for faster connections increases exponentially. Marvell leads this field with its current 800-gigabit products and is already rolling out the next wave of 1.6-terabit technology.

Marvell Management's Bullish Moves

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Marvell's leadership is making smart, decisive moves aimed at increasing strategic focus. The company recently announced the sale of its automotive business for $2.5 billion.

This allows Marvell to sell off a solid but lower-margin asset, enabling it to focus entirely on its high-growth data center core.

Furthermore, the company has an active $3 billion stock buyback plan.

By using its cash to repurchase its shares, management is signaling to the market that it believes Marvell’s stock price is undervalued.

This action aligns the company's leadership directly with investors who see the current price as an opportunity.

A Strong Buy Signal From Wall Street

Industry experts share this optimistic view. Across Wall Street, a strong consensus has formed around Marvell's future. The majority of the 31 analysts in Marvell’s analyst community rate the stock as a Buy, leading to a Moderate Buy consensus rating. Their average price target of $94.73 suggests a potential upside of nearly 38% from the price in early June, offering a healthy upside to current investors.

Recent activity continues to push a bullish sentiment among analysts:

On June 5, China Renaissance initiated coverage on Marvell with a Buy rating and a $110.00 price target.
Just days earlier, on June 2, financial services giant UBS Group (NYSE: UBS) reiterated its own Buy rating, reinforcing continued confidence from established firms.

What Marvell Investors Should Watch

No investment is a sure thing, and this holds true for Marvell. Marvell operates in the highly competitive semiconductor sector, competing head-to-head with powerful rivals such as Broadcom (NASDAQ: AVGO). The industry is also known for its cyclical nature, characterized by periods of boom and bust.

Finally, Marvell relies on a few substantial customers for a significant portion of its revenue, posing a risk if any of them changes its plans.

Is This Price Disconnect Your Entry Point?

Marvell Technology offers a unique way to invest in the AI boom by focusing on its essential infrastructure. The market has punished the company for past issues that are now fading while undervaluing its accelerating AI growth story.

For long-term investors, the current gap between Marvell's stock price and its solid business fundamentals presents a compelling opportunity that warrants examination.

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