Marvell stock rockets more than 30%, its best day ever -- is it the next hot AI play?
By Emily Bary
Chip maker's stock soars to record daily gain after company quantifies its financial opportunity from artificial intelligence
Is Marvell Technology Inc. the next hot artificial intelligence play? Wall Street seems to be betting on that, judging by the stock's massive Friday move.
Marvell shares (MRVL) rose 32.4% in Friday action, making for a historic day of gains as the stock logged its largest single-day percentage on record. The rally comes on the heels of the chip company's latest earnings report, which broke a streak of guidance misses, but, more important, carried hefty talk of the company's expected role in the artificial-intelligence revolution.
Chief Executive Matt Murphy said during Thursday's earnings release that AI is a "key growth driver" for Marvell, and he projected that revenue from AI could at least double this fiscal year. The term "AI" came up 97 times on Marvell's earnings call.
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Marvell's "AI story stole the show and is driving the stock higher," Needham analyst N. Quinn Bolton wrote in a note to clients, while noting that the company also put dollar figures on its AI opportunity. AI-related revenue was about $200 million last fiscal year, meaning it could reach at least $400 million this fiscal year and double again from there in the following fiscal year.
"With these figures and given management's clear conviction in the company's AI positioning, we expect AI to account for [more than] 15% of FY25 (CY24) total sales and continue to grow," Bolton wrote, while maintaining a buy rating and boosting his target price to $65 from $50.
Benchmark analyst Cody Acree noted that while Nvidia Corp.'s stock (NVDA)has also gotten a huge boost from AI potential, the two companies serve different parts of the equation.
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"Nvidia is likely to see AI growth driven largely by the adoption of accelerated computing advantages offered by GPUs becoming the core computing choice, versus traditional CPUs, of a growing percentage of data center spending budgets," he wrote. "Marvell, on the other hand is expecting to see its growth driven largely by the need for exponentially increased bandwidth connectivity solutions used to communicate within and between data centers, in order to take full advantage of the shifting processor opportunities resulting from future data workloads."
He had a buy rating on the stock and bumped up his price target to $75 from $70.
Other analysts sought to pump the brakes a bit, with TD Cowen analyst Matthew Ramsay writing that "time will tell" whether Marvell emerges as "a top AI growth play."
"Marvell may be nearing the end of the inventory correction that has buffeted recent results," he wrote, while keeping his outperform rating and raising his price target to $65 from $50. "Lots of discussion on long-term AI opportunity, but not quite out of the woods yet in our view."
Mizuho's Jordan Klein wrote that Marvell's stock rally comes amid "a buying frenzy for 'the next gen AI winner and NVDA catch up trade' as the CEO not only called the bottom in their revs starting Q2 '24 onward, but went out of his way to talk up how their AI related design win funnel had MATERIALLY EXPANDED in past qtr and they now are confident that their AI related revs will double in '24 vs '23 and again in '25."
But Klein, a desk-based analyst associated with Mizuho's sales team and not its research arm, noted that 2024 and 2025 consensus expectations for Marvell weren't budging much despite all the talk.
Marvell stock had trailed the S&P 500 index in the past year until Friday's sudden surge. Shares are now up 15% in the past year, as the S&P 500 has gained 2.3%.
-Emily Bary
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May 26, 2023 16:35 ET (20:35 GMT)
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