Broadcom vs. Marvell Technology: A Closer Look at AI Stocks

In 2024, semiconductor stocks Broadcom (NASDAQ: AVGO) and Marvell Technology (NASDAQ: MRVL) have shown impressive growth. Shares of both companies have more than doubled due to the increasing demand for their application-specific integrated circuits (ASICs) and networking chips used in data centers to handle artificial intelligence (AI) workloads.

Specifically, Broadcom's stock is up by 124% this year, while Marvell has seen a 93% increase. This raises the question: if you need to choose between these two AI stocks for your portfolio after their substantial gains in 2024, which one should you pick? Let's explore.

The Case for Broadcom

The demand for AI-specific ASICs is on the rise as cloud service providers look to develop chips internally to lessen their dependence on costly semiconductors from companies like Nvidia. Broadcom steps into this space by manufacturing custom chips for significant names such as Alphabet's Google, TikTok's parent company ByteDance, and Meta Platforms.

This strong customer base has positioned Broadcom advantageously in the fast-expanding market for custom AI processors. In fiscal 2024, which ended on November 3, Broadcom reported $12.2 billion in revenue from its custom AI chips and networking processors. This marks a staggering 220% increase from $3.8 billion in fiscal 2023.

Looking ahead, Broadcom anticipates that its AI-related market could grow to between $60 billion and $90 billion by fiscal 2027. During the latest earnings call, management stated that the company is 'very well positioned' to gain a significant share of this market and expects to see strong growth from its 2024 AI revenue base of $12.2 billion.

A key advantage for Broadcom is its substantial share in the ASIC market. According to J.P. Morgan, Broadcom holds an estimated 55% to 60% of the custom chip market. If Broadcom can maintain this position over the next three years and capture even half of the market, its annual AI revenue could soar between $30 billion and $45 billion, based on the estimated market size.

This means that Broadcom's AI revenue has the potential to multiply by 2.5 to 4 times in the upcoming three years, which explains why analysts have raised their growth expectations for fiscal years ahead.

The company concluded fiscal 2024 with total revenue of $51.6 billion, showing a healthy organic growth rate of 9% (excluding the impact of acquiring VMware in November 2023). Projections suggest that Broadcom could sustain its status as a leading AI stock due to its dominant position in the attractive custom AI chip sector.

The Case for Marvell Technology

Marvell is recognized as the second-largest player in the ASIC market, holding approximately 13% to 15% share. The company manufactures custom AI chips for high-profile clients like Alphabet, Microsoft, and Amazon.

Recent performance indicates a robust demand for Marvell's custom AI processors. For instance, in the third quarter of fiscal 2025, which ended on November 2, the company reported a 98% increase in data center revenue compared to the same period last year, totaling $1.1 billion. Although overall revenue grew only 7% to $1.52 billion due to challenges in other segments, the outlook is promising.

Marvell's guidance for the current quarter suggests a revenue target of $1.8 billion, indicating a year-over-year growth of 26%. This represents a significant improvement from the previous quarter, as earnings are expected to reach $0.59 per share, reflecting a modest 5% increase in the prior quarter.

The swift improvement in Marvell's financials can be attributed to stronger-than-expected demand for its AI business. Initially, the company estimated $1.5 billion in AI revenue for the current fiscal year but now believes it will substantially exceed that figure. Furthermore, management anticipates that AI revenue could reach $2.5 billion in the next fiscal year, depending on its collaboration with companies like Amazon.

As a reflection of this promising growth, Marvell expects its overall revenue to increase by 41% next fiscal year, reaching $8.11 billion after a modest 4% growth in the current year to $5.75 billion. Analysts predict that Marvell's strong performance will likely continue beyond the next fiscal year.

The Verdict

Both Broadcom and Marvell are poised for significant growth, but Marvell may be set to expand at a quicker pace due to its smaller size and potential market share gains in custom AI chips. This faster growth trajectory likely contributes to Marvell's higher valuation compared to Broadcom.

Investors seeking an AI stock that promises rapid growth might lean towards Marvell, even though its valuation is somewhat higher than that of Broadcom. On the other hand, Broadcom's dominant role and large market potential in AI chips assure that it remains a solid choice for those looking for a more affordable stock.

semiconductors, AI, stocks