Marvell Technology shares surged Friday after the chipmaker called out artificial intelligence as a major growth driver. MRVL stock also got a lift from its beat-and-raise earnings report.
The Santa Clara, Calif.-based company late Thursday said it earned an adjusted 31 cents a share on sales of $1.32 billion for the period ended April 29. Analysts polled by FactSet had expected earnings of 29 cents a share on sales of $1.3 billion. On a year-over-year basis, Marvell earnings fell 40% while sales dropped 9%.
For the current quarter, Marvell forecast adjusted earnings of 32 cents a share on sales of $1.33 billion. That's based on the midpoint of its outlook. Wall Street had called for earnings of 30 cents a share on sales of $1.31 billion in the fiscal second quarter.
"We are expecting revenue growth to accelerate in the second half of this fiscal year, accompanied by gross and operating margin expansion," Chief Executive Matt Murphy said in a news release.
MRVL Stock Jumps On AI Outlook
Also, Marvell expects to profit from growing investments in artificial intelligence, Murphy said.
"AI has emerged as a key growth driver for Marvell, which we are enabling with our leading network connectivity products and emerging cloud-optimized silicon platform," he said.
Murphy added, "While we are still in the early stages of our AI ramp, we are forecasting our AI revenue in fiscal 2024 to at least double from the prior year and continue to grow rapidly in the coming years."
On the stock market today, MRVL stock rocketed 32.4% to close at 65.51. With the move, MRVL stock broke out of a 15-week consolidation pattern at a buy point of 49.58, according to IBD MarketSmith charts.
Marvell makes networking and data storage chips used in cloud computing, automotive, communications and other applications.
AI Chip Sales Small Now But Growing Fast
Marvell expects its AI chip business to grow from $200 million, or 3% of sales, last year to $800 million, or about 15% of sales, next year. It sees AI sales doubling this year and next.
Jordan Klein, managing director for tech, media and telecom sector trading at Mizuho Securities, said the jump in MRVL stock is based on AI hype. That includes generative AI, the technology capable of creating content, such as text, images, videos and music, from simple descriptive phrases.
"Investors all around are starved for new generative AI-related ideas no matter how big or small the actual revenue impact (is) expected to be in (the) next year," he said in a note to clients. "The concept and idea of AI-related demand and growth is all it takes in this market to pull in real buyers."
Marvell stock ranks 10th out of 37 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. MRVL stock has an IBD Composite Rating of 91 out of 99.
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