Marvell Technology (NASDAQ: MRVL) could see demand for its semiconductor solutions explode over the next few years. Marvell’s products are used in a wide range of goods, from game consoles and printers to enterprise workstations and artificial intelligence (AI) servers. But data center, including AI-related products, is its largest business, totaling 40% of its revenue last year.
The growth in AI infrastructure spending could significantly benefit Marvell’s revenue growth and stock performance over the next year.
The risk for investors is buying the stock before a cyclical downswing in demand, which is common for the semiconductor industry. However, the industry has experienced a lot of growth over the last 40 years, so buying shares of leading companies as they emerge from a downswing can be to your advantage.
Here are two reasons Marvell stock is a buy right now.
1. Marvell is well positioned for growing AI demand
Marvell reported a year-over-year decline of 12% in revenue in the fiscal first quarter of 2025 to $1.16 billion, but it is just starting to see a recovery after a weak year for demand across some of its business segments. The revenue decline was driven by weakness in enterprise networking, industrial, and consumer products. Management expects these markets to bottom in the second half of the year.
The reason to buy the stock now is the growth in Marvell’s data center business, where revenue nearly doubled over the year-ago quarter to $876 million. Marvell is meeting a crucial need for AI-optimized data centers. It provides interconnects and other data transfer products that allow clusters of high-performance computing systems to communicate through high-speed connections — a must-have for AI workloads.
Marvell believes it has plenty of opportunities to expand its addressable market across AI compute programs, interconnect switching, and storage solutions. Management previously guided for AI-related revenue to reach $1.5 billion this year, or nearly 30% of its total revenue, before growing to $2.5 billion next year.
Overall, Marvell sees the data center infrastructure addressable market tripling to $75 billion by 2028. This tailwind could fuel outstanding returns for shareholders.
2. The stock is reasonably priced relative to growth expectations
Coming out of the recent downturn for the semiconductor industry, Wall Street is becoming increasingly bullish on Marvell’s prospects. The average analyst expects the company’s earnings per share to grow at an annualized rate of 34% over the long term. This is up from a low-double-digit estimate a year ago.
Historically, the best time to buy shares of Marvell or other semiconductor stocks is when the industry is turning the corner after a rough year. Now appears to be an ideal time to jump on board. Despite higher growth expectations, the stock is up 18% over the last 12 months but is still trading 24% below its previous peak.
The stock’s recent advance has brought its forward price-to-earnings (P/E) ratio to a more expensive 50 multiple. However, the company should be able to grow into the stock’s high valuation. For example, when considering next year’s earnings estimate, the stock’s forward P/E drops to a more reasonable 28.
Once Marvell’s non-data center markets recover, such as enterprise networking and consumer products, the stock could be off to the races. With management anticipating a recovery in all of its end markets in the second half of the fiscal year, the stock looks like a great buy right now.
Should you invest $1,000 in Marvell Technology right now?
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John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
2 Reasons to Buy Marvell Technology Stock Like There’s No Tomorrow was originally published by The Motley Fool