Why Marvell Technology Rallied in May

Shares of Marvell Technology (NASDAQ: MRVL) rallied 24.1% in May, according to data from S&P Global Market Intelligence.

Marvell had a busy month, reporting first-quarter earnings toward the end of May. Additionally, Marvell received a small investment from Advanced Micro Devices (NASDAQ: AMD), which is interesting because AMD is both a customer and, in some ways, a competitor.

Marvell's earnings cap a strong month for AI stocks

Marvell reports somewhat later in the quarter than other major semiconductor stocks and cloud computing giants, so it had already been riding some sectorwide strength. The recent earnings season showed continued booming demand for AI infrastructure. Connectivity, where Marvell's product portfolio shines, is front and center, as the move from training to inference to agentic AI places greater emphasis on how GPUs, CPUs, ASICs, and memory fit together in an optimized package.

In the middle of the month, AMD filed its 13-F document, which discloses its investments, disclosing that it had taken a small $6.5 million position in Marvell. While $6.5 million is really pennies compared to the size of these chip giants, the fact that AMD is investing in Marvell at all is interesting and suggests a closer partnership between the two moving forward.

Marvell followed up this good news with strong earnings on May 27. In the first quarter, Marvell reported revenue growth of 28% to $2.4 billion, while adjusted (non-GAAP) earnings per share grew 29% to $0.80. Both figures beat analyst expectations. Management also guided to strong sequential growth, forecasting $2.7 billion in revenue and $0.93 in adjusted EPS in the current quarter, and also gave longer-term guidance for the rest of the year and into next year. Fiscal year 2027 revenue guidance was raised to about $11.5 billion, up 40% overall, driven by 70% growth in data center interconnect, up from a prior expectation of 50%. Additionally, management raised fiscal 2028 guidance to $16.5 billion, up nearly 45%.

Investors and analysts cheered the strong results and the visibility into accelerating revenue growth over the next two years, lending even more credence to the positive outlooks given by AI companies throughout the past earnings season.

Image source: Getty Images.

Jensen Huang thinks there's more to come

After the May surge, Marvell got yet another big vote of confidence from Nvidia (NASDAQ: NVDA) CEO Jensen Huang in early June. Presenting with Marvell CEO Matt Murphy at Computex in Taiwan, Huang called Marvell, "the next trillion-dollar company, ladies and gentlemen."

Those kind words sent Marvell's stock up another 30% on the day, on top of May's strong gains. While Marvell now trades at a lofty 65 times this year's earnings estimates and 43 times next year's adjusted earnings estimates, which is certainly not cheap, the stock's current market cap is still just $230 billion. That means if Marvell does eventually reach a trillion-dollar valuation, that would be another 300%-plus gain from here.

It seems like a long shot that Marvell could reach that plateau anytime soon; however, if the company keeps posting accelerating growth amid the AI infrastructure build-out, nothing seems out of the question.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.