Semiconductor maker Marvell Technology is the IBD Stock of the Day. MRVL stock has found technical support at a key level as analysts debate upside from artificial intelligence-related investments in data centers vs. other business trends.
Marvell makes chips used in wireless phone networks, automobiles, industrial systems, data storage devices and data centers. Semiconductor companies are in favor as AI stocks to watch because of high-performance computing and networking needed in data centers.
For its fiscal 2023 that ended in January, Marvell sales rose 33% to $5.92 billion. In fiscal 2024, sales are expected to fall 6%, then rebound to 17% growth in fiscal 2025.
But Marvell management expects its AI chip business to grow to $400 million in fiscal 2024, up from $200 million in fiscal 2023. Then it sees AI sales doubling again in fiscal 2025 to $800 million, reaching about 15% of sales.
On the other hand, management expects weakness in telecom network, enterprise networking and data storage sales.
MRVL Stock Surges On AI Outlook
MRVL stock surged on the AI outlook, as investors shrugged off first-quarter fiscal 2024 earnings that dropped 40% while revenue fell 9%. Marvell reported its fiscal first-quarter results after the market close on May 25. Marvell stock surged 32% on May 26.
On May 30, the next trading session, shares rose another 4% to 67.99 in intraday trading. But the stock reversed down and ended the day 3% lower, starting a pullback pattern.
From a technical view, MRVL stock in June began forming a base. Marvell stock still has one week more to complete a consolidation.
Amid the pullback, MRVL stock found support at its 21-day exponential moving average on July 1. On the stock market today, MRVL stock rose 2.6% to close at 61.35, continuing the bounce from the 21-day line.
Inphi, Innovium Acquisitions
For aggressive investors, Marvell stock would have a 61.46 entry point, the June 28 high, as it breaks a downward trend.
Investors may find a deeper dive into the AI business helpful.
On its first-quarter earnings call, management broke out AI revenue. Most of Marvell's AI revenue comes from optical digital signal processors that operate at 800 gigabits per second.
To get into the optical networking business, Marvell acquired Inphi in 2020 and Innovium in 2021. Amazon Web Services, the cloud unit of Amazon.com, is a big Innovium customer.
AI Stocks To Watch
Further, Marvell's digital signal processors work in tandem with Nvidia core processors within data centers. The optical DSPs will remain the key AI growth driver for MRVL stock in fiscal 2024.
Longer range, Marvell could win more business in the computing part of AI processing. Nvidia is by far the leading supplier of chips that process AI software. Advanced Micro Devices aims to challenge Nvidia's dominance with new devices. And, Intel is a player among AI stocks in the market.
Marvell, along with Broadcom, sells custom AI processing chips. That's a small part of the market but growing. Analysts expect demand for custom AI processing chips to increase because of the rise of "generative" AI.
Training generative AI models requires an order of magnitude more compute power than inferencing — executing AI applications in real-time, analysts say.
That's the opportunity Marvell plans to pursue, though actual revenue is small. Also, Alphabet-parent Google and Amazon have developed their own in-house, internally developed AI silicon.
While Marvell has a strong presence in optical networking, Broadcom is a tough rival. And, stiffer competition looms from Cisco Systems, analysts say. Cisco is selling optical devices targeting the AI market.
Marvell Stock: Technical Ratings
The IBD Stock Checkup tool shows that MRVL stock has a Composite Rating of 87 out of a best-possible 99. The rating means Marvell stock currently outperforms 87% of all stocks in fundamental and technical stock-picking criteria.
MRVL stock has a Relative Strength Rating of 93. The rating shows how a stock's price performance over the last 52 weeks holds up against all the other stocks in IBD's database.
Also, Marvell has an Accumulation/Distribution Rating of C+. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
