Jensen Huang Says Marvell Technology Is the Next Trillion-Dollar Company. How Quickly Can It Get There?

Nvidia CEO Jensen Huang is a bit of a visionary these days. When he speaks, people don't just notice, but they make investment decisions based on his words. That's why when he recently said Marvell Technology (NASDAQ: MRVL) would be worth $1 trillion one day, investors were quick to buy up shares in the chip company.

Marvell is nowhere near a $1 trillion valuation today, as its market cap is closer to $250 billion. If Huang's projection proves to be correct, however, you could generate a 4x return if you were to invest in Marvell's stock right now. But just how quickly could it really be for the company to soar to such a lofty valuation?

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Marvell's valuation looks pricey right now

In just the past month, shares of Marvell have spiked more than 60%, as Huang's encouraging words definitely put the tech stock on the radar of many investors. The problem, however, is that this has also resulted in a much higher valuation for the stock, raising questions about how high a premium investors will be willing to pay for Marvell.

Currently, its price-to-earnings (P/E) ratio is at 100. Even based on analysts' projections for the year ahead, its forward P/E multiple is still fairly high at around 70. What this means is that investors are effectively buying the stock based on where they think the company may be in a few years, assuming it will have achieved significant growth along the way. If you're investing in the stock today and think it's a good deal, given its inflated valuation, you may need to be fairly certain it'll do well over the next five-plus years. That's a big ask.

When might Marvell reach $1 trillion in market cap?

Given how quickly stocks have been rising, referring to Marvell as the next company to reach $1 trillion suggests that Huang isn't expecting a decade or even several years before it reaches that valuation. Marvell achieved 28% revenue growth in its most recent quarter and anticipates its growth rate to rise higher this year. As that happens and its bottom line improves, its valuation may begin to look more reasonable, prompting more buying from investors.

While I don't think Marvell is going to take off and reach $1 trillion this year, it may be possible within the next two to three years, if it experiences a continued surge in demand. However, investors should be careful not to assume it will be a sure thing, as challenges may arise along the way. Although Huang clearly sees considerable growth ahead for Marvell, investors should tread carefully given the stock's high valuation.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology and Nvidia. The Motley Fool has a disclosure policy.