Is Marvell Technology a Millionaire-Maker Stock?
Key Points
Marvell Technology's market cap has almost tripled this year thanks to robust demand for AI infrastructure products.
Its six-year $120 billion deal with Alphabet shows how quickly long-term revenue visibility and growth can improve.
Although Marvell Technology is trading at a high forward P/E ratio, it only needs a few more big contracts to justify its current valuation.
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Marvell Technology (NASDAQ: MRVL) is deeply involved in artificial intelligence infrastructure, with its optical chips, application-specific integrated circuits (ASICs), data storage controllers, and CXL memory products. This broad portfolio of products explains why Nvidia CEO Jensen Huang said back in June that he expects Marvell Technology to be the next $1 trillion company.
Given its current market cap of around $215 million, that prediction implies a nearly 5x return from current levels, a gain that could help mint many new millionaires, and the fundamentals certainly look promising. Here's what investors should know.
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Marvell's long-term deal with Alphabet gives it a massive backlog
Marvell Technology is already doing well. In its fiscal 2027 second quarter, which ended Aug. 1, the company delivered 37% year-over-year revenue growth, with "AI-related bookings remain[ing] exceptionally robust," according to Marvell Technology CEO Matt Murphy. He also expects AI revenue to accelerate further in fiscal 2027, prompting the company to raise its guidance for fiscal 2027 and 2028.
Moreover, after that quarter ended (but before its report came out), the company announced a big expansion of its AI chip deal with Alphabet. It amounts to $120 billion over roughly six and a half years, and that business arrangement starts in Marvell's fiscal 2029.
Marvell Technology will continue to strengthen its market position in the meantime, and if it can land big deals like that with other tech giants, it could see an extended rally. Marvell Technology generated $2.74 billion in sales in its fiscal Q2 while boosting net profit margins, and its guidance for the upcoming quarter implies 15% sequential revenue growth at the midpoint.
A high valuation is the price of entry
Although Marvell Technology has several attractive catalysts ahead of it, the stock isn't cheap. It trades at a forward P/E ratio of 62. Other chipmakers such as Broadcom and Nvidia offer cheaper valuations and solid growth prospects. Furthermore, those two companies are exhibiting higher revenue growth rates than Marvell Technology.
While Nvidia and Broadcom look more attractive if you only consider next year, Marvell Technology may be the better choice when considered over a five-year time horizon. Its big deal with Alphabet will contribute roughly $5 billion per quarter in sales once it starts, and that's almost two times Marvell Technology's Q2 FY27 revenue.
Marvell Technology is still of a size where a single new contract of that magnitude can change the investment thesis in the stock overnight. Nvidia is on its way to more than $100 billion in quarterly revenue, so it would need multiple large contracts to sustain meaningful growth. Marvell Technology is well-positioned to gain market share as optical chips and ASICs gain traction. A few more major contracts could spark a rally that lifts its market cap closer to Jensen Huang's $1 trillion prediction.
Should you buy stock in Marvell Technology right now?
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Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Alphabet, Broadcom, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.
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