Is Marvell (MRVL) 2025’s Top AI Stock? The Path to a $150 Share Price
As 2024 draws to a close, NVIDIA (Nasdaq: NVDA) remains the spotlight in the artificial intelligence (AI) sector. However, emerging shifts within the AI landscape position Marvell (Nasdaq: MRVL) to potentially outperform NVIDIA and other prominent AI stocks in 2025. Recently, Marvell was incorporated into our $500,000 AI Portfolio, where we invested $25,000 in the company’s stock. Here’s why Marvell could lead to exceptional returns in the upcoming years.
Key Factors Favoring Marvell’s Growth
Marvell is a significant partner in the development of Amazon’s homegrown Trainium 2 chip, specifically designed for handling AI workloads. Amazon’s extensive investment and partnerships related to Trainium 2 could create substantial upside for Marvell’s performance throughout the next year. It’s probable that Wall Street has yet to fully recognize the magnitude of this opportunity.
The Accelerator Market: A Key Battleground for AI
The current competition in AI centers around the market for ‘accelerators’—the chips that are essential for training and running AI models. NVIDIA currently leads this market with impressive sales figures:
- NVIDIA reported $27.6 billion in accelerator revenue (their ‘compute’ Data Center sales) last quarter, reflecting a 112% year-over-year sales growth.
- Broadcom generated $3.5 billion in AI revenue last quarter, with accelerator sales increasing at a rate of 3.5X year-over-year.
- AMD anticipates $5 billion in AI chip sales for 2024.
- Marvell, classified as the largest ‘unknown’ in this sector, is targeting $2.5 billion in AI revenue for the next fiscal year, a third of which is expected to stem from accelerator sales.
In contrast, Intel garners minimal revenue from its Gaudi line, and various startups including Cerebras also vie for market share. AMD projects that the accelerator revenue will compound at an impressive 60% annual growth rate, possibly reaching $500 billion by 2027. Should these forecasts materialize, they would match the total semiconductor industry sales from 2023.
A mere 5% share of a potential $300 billion AI accelerator market could translate into $15 billion in sales for Marvell, whose overall revenue for 2025 is expected to be $5.5 billion.
Custom Chips vs. GPUs
The rivalry is not just about sales but also about product types. On one side are GPUs from competitors like AMD and NVIDIA, known for their general-purpose capabilities. On the other, companies such as Marvell and Broadcom have gained traction in the custom chip development arena. Popular large ‘hyperscalers’—including Amazon, Alphabet, Microsoft, and Meta Platforms—are the primary customers of NVIDIA. Collectively, they plan to allocate $50 to $100 billion next year for capital expenditures, primarily for AI data centers. The high operational margins enjoyed by NVIDIA (approximately 63% on GPU sales) have attracted these companies towards alternatives to avoid high dependency on a single supplier.
Marvell and Amazon: A Strategic Alliance
Interestingly, the mutually beneficial relationship between Marvell and Amazon has not received the recognition it deserves. A recent Bloomberg article highlighted Amazon’s aggressive strategy to compete against NVIDIA in AI chip production but overlooked Marvell’s significant role.
Marvell is crucial in supporting Amazon’s chip division, specifically the Trainium 2 and the forthcoming Inferentia 2.5. With Amazon poised to ramp up its production of Trainium chips this quarter, major sales are expected to follow through to 2025. Notably, Amazon’s rapid investments and partnerships—including a $4 billion investment in AI company Anthropic, which plans to use Trainium chips—underscore the urgency to build significant AI capabilities.
As Amazon aims to cement its position in the cloud computing space, the need for trains and customized chips presents enormous opportunities for Marvell. Analysts estimate that Trainium revenues could reach up to $2.5 billion for Marvell by 2025, dominated largely by the next fiscal year’s sales.
Marvell’s Broad Growth Potential
While a significant focus has been on Marvell’s partnership with Amazon, the company’s core product lines are also on track for considerable revenue growth in 2025. Marvell’s networking technologies, essential for connecting large clusters of AI chips, are seeing expanded applications due to the march toward AI-empowered data centers.
Furthermore, many industries dependent on Marvell’s solutions are expected to rebound after a challenging cycle, leading to increased spending throughout 2025.
In Conclusion
As 2025 approaches, the convergence of Marvell’s strategic partnerships, particularly with Amazon, alongside broader market dynamics in AI accelerators and networking technologies, paints an optimistic picture for the company’s financial future. Should these momentum shifts materialize as anticipated, Marvell could emerge as a formidable competitor, potentially driving its share price toward ambitious new heights.