Marvell's Data Center Revenue Just Grew 21%. Here's Why This Artificial Intelligence (AI) Stock Could Deliver 50% Upside in 2026.

The rapid adoption of artificial intelligence (AI) is driving explosive demand for data center infrastructure. Hyperscalers spent $410 billion in capital expenditures last year, according to The Motley Fool's research, and capital spending is expected to increase again in 2026.

Marvell Technology (NASDAQ: MRVL) is well-positioned to benefit from this trend. It supplies high-speed interconnects, networking switches, and custom chips that keep everything in the data center connected and running fast. Its data center revenue grew 21% year over year last quarter, and with management forecasting that rate of growth to double this year, the stock may have a realistic chance of climbing 50% within the next year.

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Strong data center growth

Marvell just completed another strong year. For fiscal 2026 (which ended in January), revenue grew 42% to $8.2 billion. This was primarily driven by data center demand, which makes up roughly three-quarters of the company's total revenue.

But nothing gets a stock moving more than stellar earnings performance. High-performance products for data centers generally earn high margins, and Marvell is delivering on that end. For the full year, adjusted earnings per share jumped 81% to $2.84.

Importantly, management's outlook indicates that it continues to see strong customer demand for data center components. For fiscal 2027, the company now expects revenue to hit $11 billion, representing more than 30% growth over last year.

However, the big reveal in the earnings report was that data center revenue growth is expected to accelerate to 40% this year, driven by demand for interconnects, custom chips, and Ethernet switches.

Given its momentum and outlook, the stock's modest valuation might be underestimating the strength of data center spending.

What is the stock's upside?

The stock trades at a relatively modest 24 times this year's consensus earnings estimate. This seems to underestimate future earnings, as the forward earnings multiple drops to just 17 on fiscal 2028 estimates. That's a legitimate bargain for a growth stock.

The consensus earnings estimate for fiscal 2028 is $5.44 per share. Applying the current forward price-to-earnings (P/E) multiple of 24 to next year's estimate puts the share price at $130 -- implying 41% upside from current levels. If the stock returns to its three-year average forward P/E of 38, that implies a forward price of $206, or 125% upside.

Of course, nothing is guaranteed in the stock market. A slowdown in data center spending due to energy bottlenecks or other economic uncertainty could pressure Marvell's revenue growth and limit the stock's upside, potentially even sending it lower.

Overall, Marvell appears to be one of the more attractive semiconductor stocks right now, given its valuation and growth outlook. AI infrastructure spending could still be in the early innings, making the stock a compelling buy for the next 12 months and potentially for years to come.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology. The Motley Fool has a disclosure policy.