Arm vs. Marvell Technology: Which AI Chip Stock Is a Better Buy in 2026?

Arm Holdings (NASDAQ:ARM) and Marvell Technology (NASDAQ:MRVL) both sell into the AI data center boom, but they make money in very different ways.

Arm provides the architectural blueprints for the energy-efficient processors found in nearly every smartphone and a growing number of data centers. Marvell specializes in high-speed networking and custom silicon for moving and processing data within the cloud. Investors have rewarded both, with Marvell shares more than tripling over the past year and Arm's more than doubling.

The case for Arm

Arm licenses its intellectual property to semiconductor companies and earns royalties on chips that use its designs. The company says it has held more than 99% of the smartphone application processor market for years, and it's pushing further into data centers, where its royalties more than doubled year over year in its fiscal first quarter.

In fiscal 2026, which ended March 31, 2026, revenue rose 22.8% to $4.92 billion. Net income came to $904 million, up from $792 million in fiscal 2025. Growth held at 22% in the June quarter, and management guided for revenue of $1.38 billion, plus or minus $50 million, in the September quarter.

Arm carried no debt beyond lease obligations at the end of fiscal 2026, and its current ratio was about 6.0, meaning current assets covered short-term obligations six times over. Free cash flow, which is operating cash flow minus capital expenditures, was about $979 million. Stock-based compensation equaled roughly 69% of operating cash flow. Because it's a noncash expense added back to the cash flow statement, it inflates reported cash generation.

The case for Marvell Technology

Marvell makes data infrastructure chips, including networking products and custom silicon for cloud companies. Its revenue is concentrated among a small group of buyers. Its 10 largest customers made up 82% of revenue in fiscal 2026, with one distributor accounting for 37% and one direct customer for 14%.

One of those relationships just got bigger. In July, Marvell signed an expanded agreement to develop custom chips that attach to Google's TPU ecosystem, and in August, it issued Google a warrant to buy up to 58,970,907 shares at $206.58 apiece. Nearly all of those shares vest only as Google's purchases add up, with one tranche vesting for each $500 million in custom product revenue through fiscal 2033.

Revenue climbed 42.1% to $8.19 billion in fiscal 2026, which ended Jan. 31, 2026. Marvell posted GAAP net income of $2.67 billion after net losses in each of the two prior years, although a $1.8 billion pre-tax gain on the sale of its automotive Ethernet business accounts for a large share of that profit. Momentum has picked up since. Revenue rose 37% to a record $2.74 billion in the second quarter of fiscal 2027, and management guided for about $3.15 billion in the third quarter, plus or minus 5%.

At the end of fiscal 2026, total debt equaled about 0.3 times shareholders' equity, and the current ratio was about 2.0. Free cash flow totaled about $1.4 billion, and stock-based compensation accounted for roughly 34% of operating cash flow.

Risk profile comparison

Arm faces competition from free, open-source alternatives like RISC-V, and the company notes that many of its customers support that architecture. Smartphones remain a large exposure, since mobile application processors produced about 43% of Arm's royalty revenue in fiscal 2026. SoftBank Group also owns about 86.4% of Arm, making it a controlled company and leaving outside shareholders with little say.

Marvell's customer concentration means the loss of a single large buyer could hit results hard. The majority of its products are made by third-party foundries in Taiwan, leaving it exposed to regional geopolitical tensions, and export controls have previously limited its sales to customers in China. The Google warrant could also dilute existing shareholders by roughly 6.7% of today's outstanding shares if it fully vests.

Valuation comparison

Marvell trades at less than half of Arm's multiples of both forward earnings and sales.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Marvell looks like the better buy to me, but I'd go in knowing that a small group of cloud customers can swing its results from one year to the next.

The case comes down to growth and price. Marvell's sales are rising faster than Arm's, and management expects that pace to accelerate through the rest of fiscal 2027 as its custom chip work ramps up. Yet its shares trade at less than half of Arm's multiple of forward earnings.

I'm comfortable with the Google warrant. It could dilute existing holders, but nearly all of those shares vest only if Google keeps buying custom chips from Marvell in very large quantities, so the dilution would accompany a lot of new revenue. Having Google tie its own upside to Marvell's success is a vote of confidence I'd take.

Arm is a terrific business. Its designs are found in nearly every smartphone, and data centers are becoming a second growth engine. The problem is the price. At more than 120 times forward earnings, the stock already assumes years of excellent execution, and SoftBank's majority stake leaves outside shareholders with little say in how the company is run.

For a patient investor who owns a diversified portfolio and plans to hold for years, Marvell offers more growth for the money. Its Investor Day on Oct. 6 should give a clearer look at how much of that growth management can see ahead.

Mike Schwenk has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Arm Holdings, and Marvell Technology. The Motley Fool has a disclosure policy.