Better Buy After the Semiconductor Sell-Off: Marvell or Broadcom?

The companies that design custom chips for the world's largest cloud operators have been among the biggest winners of the artificial intelligence (AI) build-out. But last week, investors were handed a sharp reminder that expectations can outrun even rapid growth. Marvell Technology (NASDAQ: MRVL), which had soared roughly 32% in a single session days earlier, gave back a good chunk of that gain by Friday's close. And Broadcom (NASDAQ: AVGO) tumbled about 12% on Thursday and slid further on Friday after its latest outlook for AI chip sales came in below the loftiest hopes.

Both companies design custom AI accelerators and the high-speed networking gear that links sprawling data centers, selling largely to a handful of hyperscale customers. So, with both stocks now well off their recent highs, which one looks like the better buy?

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Marvell: small base, big expectations

Marvell plays in the same arena as Broadcom -- custom silicon and connectivity chips for cloud customers -- but from a far smaller base. In its fiscal first quarter of 2027 (the period ended May 2, 2026), revenue grew 28% to a record $2.4 billion, with its data center business making up more than three-quarters of the total. Management guided for 35% growth in the current quarter, citing accelerating demand.

"We are seeing exceptional AI-related bookings, and as a result, we are significantly raising Marvell's revenue outlook for both fiscal 2027 and fiscal 2028 compared with the guidance we provided last quarter," said CEO Matt Murphy in the company's fiscal first-quarter earnings release.

Looking ahead, Marvell now expects fiscal 2027 revenue growth of about 40%.

Much of the stock's recent excitement, though, traces to a single moment. At an industry event earlier this month, Nvidia CEO Jensen Huang singled out Marvell as a potential trillion-dollar company, pointing to the rising importance of connectivity inside AI data centers. Shares spiked about 32% the next session before the broad chip pullback dragged them lower.

But the stock looks expensive. Even after Friday's decline, Marvell trades at roughly 90 times earnings as of this writing -- far ahead of Broadcom's valuation -- while growing revenue more slowly. And its heavy reliance on the data center, and on a small group of customers within it, leaves little cushion should even one large program slip.

Broadcom: scale and cash flow

In Broadcom's fiscal second quarter of 2026 (the period ended May 3, 2026), its revenue rose 48% year over year to a record $22.2 billion -- a significant step up from 29% growth in the prior quarter. And AI drove the revenue gain: semiconductor revenue tied to AI surged 143% to $10.8 billion, which now accounts for nearly half of the company's total sales.

And profitability looks good, too. Broadcom's non-GAAP (adjusted) earnings per share climbed 54%.

Further, management expects this momentum to strengthen. Broadcom guided for fiscal third-quarter AI semiconductor revenue of $16.0 billion, which would mark growth of more than 200% year over year.

"We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion," said CEO Hock Tan during the company's fiscal second-quarter earnings call.

Broadcom also notably generated $10.3 billion in free cash flow in the quarter, or 46% of revenue. And at about 64 times earnings as of this writing, investors can buy into this growth story at a more reasonable price than Marvell's.

The better buy today

Both stocks carry real risk after their long climbs (inclusive of their pullbacks late last week), and any meaningful slowdown in AI spending could spook investors and likely trigger an even bigger sell-off in these stocks.

But for investors comparing the two stocks, Broadcom arguably looks more attractive. It is growing faster and trades at a much more justifiable valuation. Sure, Huang's endorsement is notable. But much of that optimism already appears baked in.

Overall, Broadcom stock looks like the better buy after the sell-off.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.