Nvidia CEO Jensen Huang Says This Is the Next Trillion-Dollar AI Chip Stock. Is He Right?

Nvidia (NASDAQ: NVDA) CEO Jensen Huang is one of the most well-respected names in the artificial intelligence (AI) industry. As the head of the largest AI semiconductor company, working closely with the world's leading cloud computing companies, he has unique insight into their evolving needs.

That's why investors pay close attention to what Huang has to say. On stage at Computex Week in Taipei, Huang presented with Marvell Technology (NASDAQ: MRVL) CEO Matt Murphy, describing his company's chips as essential. "That's why you're going to be the next trillion-dollar company," Huang said.

Marvell stock has skyrocketed since those comments, and it sports a market cap of about $278 billion as of this writing. If Huang is right, though, the stock could nearly quadruple from here.

Image source: Nvidia.

Is Marvell the next trillion-dollar company?

Marvell specializes in optical interconnect chips that transmit data at ultra-high speeds. As Huang said, those chips are essential for optimizing data centers full of expensive, high-powered GPUs. Ensuring data is routed to where it needs to be as quickly as possible can provide an enormous cost savings at the hyperscale level.

To that end, Marvell and Nvidia agreed earlier this year to work closely, using Nvidia's NVLink platform to optimize chip designs across Marvell's portfolio. That coincided with Nvidia investing $2 billion of its cash in Marvell stock.

Management raised its outlook for the interconnect business with its first-quarter earnings report last month. It now expects 70% year-over-year growth for the segment. That should support overall revenue growth of 40% for the full year, with continued acceleration into 2028.

Another key driver of revenue growth in fiscal 2028 and beyond is Marvell's custom AI accelerator (XPU) business. Management said it expects the relatively small segment to grow 20% this year, but it will double in 2028 as a major tier-1 XPU customer (likely Microsoft) begins volume production. Management forecast $10 billion in revenue from custom AI chips by fiscal 2029. To put that in perspective, that's more than Marvell's total revenue last year.

There's no doubt Marvell is well positioned to generate substantial revenue growth over the next few years, thanks to its lead in networking chips and rapidly growing custom compute business. While Huang didn't set a timeline for his $1 trillion declaration, Marvell would need to reach a trailing price-to-sales ratio of about 40 in early 2029, based on management's guidance and commentary. Its trailing P/E ratio would have to reach 127 based on analysts' current estimates. For reference, Nvidia currently trades for 21 times sales and 33 times earnings.

For Marvell to reach a $1 trillion valuation within the next few years, it'll have to exceed management's own guidance and analysts' expectations by a wide margin. That said, Marvell is an excellent business with strong momentum in two key areas of artificial intelligence semiconductors. Patient investors may be rewarded for holding the stock. However, after the recent run-up in the stock price driven by Huang's comments, readers may want to wait for a better entry point.

Adam Levy has positions in Microsoft. The Motley Fool has positions in and recommends Marvell Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.