The “No-Error Era” for AI Chip Stocks: Marvell Meets Expectations Yet Plunges 11%

TradingKey - Custom chip giant Marvell Technology (MRVL) reported its latest quarterly results:
Q2 revenue hit a record $2.01 billion, up 58% year-over-year
Adjusted EPS of $0.67, in line with market expectations
Despite delivering solid results, the stock plummeted 11.28% in after-hours trading after its Q3 revenue guidance came in slightly below expectations. The company forecasted a midpoint of $2.06 billion, compared to the consensus estimate of $2.11 billion — a narrow miss that was enough to trigger a sharp sell-off. Year-to-date, Marvell shares are now down over 30%.
[Source: Google Finance]
The market reaction underscores a new reality: in the high-stakes world of AI chip stocks, simply meeting expectations is no longer enough.
CEO Matt Murphy emphasized that demand for Marvell’s AI-optimized custom chips and electro-optical products is at “historically high levels,” with data center business now accounting for three-quarters of total revenue. He explained that growth in custom silicon is inherently “non-linear” — with Q3 expected to be flat, but a “significant acceleration” anticipated in Q4.
The company has also completed the spin-off of its automotive Ethernet business to sharpen its focus on AI and data center opportunities, and will now report non-data-center segments as a combined category.
The severity of the market’s reaction highlights how little room for error remains in a high-valuation environment.
Zacks Investment Research noted that elevated valuations earlier this year have left AI chip stocks extremely sensitive to any sign of deceleration.
While Morgan Stanley argues that Marvell’s high-margin optical solutions are undervalued and that its collaboration with Amazon on “XPU attach” projects offers long-term upside, investors are demanding immediate, above-consensus results.
Marvell’s situation reflects a broader shift in the AI investment landscape: the market is moving from “story-driven” optimism to “execution-driven” scrutiny. In this new phase, even a temporary pause in growth momentum can trigger a sharp re-rating of expectations and valuations.
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