Should You Consider Marvell Technology Instead of Nvidia?

As the saying goes, past results do not always predict future success.

There's no doubt that Nvidia (NVDA), a giant in the tech industry, has been at the forefront of the artificial intelligence (AI) boom. Its chips are critical to many data centers, and its stock price has surged dramatically since early 2023, when the AI revolution gained full momentum. Nvidia's shares have skyrocketed over 800% in the past two years, outpacing the S&P 500, which has advanced by 58% in the same period.

However, the landscape is always shifting. New competitors emerge, technology progresses, and customers begin to seek tailored solutions to their needs. This can lead to diminished interest from investors in a previously hot stock.

If you are thinking about investing in Nvidia or still hold its stock, it might be worthwhile to look at another promising tech company: Marvell Technology (MRVL).

Understanding Marvell Technology

If you're not familiar with Marvell, you’re not alone. With a market cap of under $100 billion, it doesn't grab headlines like Nvidia, which boasts a whopping $3 trillion valuation. Interestingly, Marvell hasn't caught the attention of many hedge funds and investment managers either. In a recent examination of 16 billionaires' portfolios by The Motley Fool, Marvell wasn't a significant holding for any of them, and it may deserve more attention.

Investors on the lookout for ways to tap into the AI boom may overlook Marvell, but it has quietly played a vital role. Marvell manufactures a variety of essential components, including data center switches, hard drive controllers, and processors that often go unnoticed. Its technology is integral to 5G equipment, automotive systems, and, crucially, AI data centers that require extensive configurations of components to operate efficiently.

Recently, Marvell introduced its new Aquila DSP (digital signal processor), capable of processing 1.6 trillion bits of data every second. This advanced, energy-efficient technology can be used in compact data centers linked by connectivity wiring stretching up to 20 kilometers. Market research firm Dell'Oro Group predicts the demand for this new data center processor is set to grow at an astonishing annual rate of 200% over the next five years.

That’s just one of the exciting innovations from Marvell. The company also announced a significant advancement in high-bandwidth memory (HBM) modules, which are expected to give AI platforms 25% more computing power than current systems without requiring extra space. According to Mordor Intelligence, the global HBM market is anticipated to grow at a nearly 26% annual pace until 2029.

While Nvidia's processors are undoubtedly strong workhorses, the technology supporting these processors will need to evolve for AI to continue advancing. Marvell Technology is at the forefront of this low-profile innovation.

Growth Prospects and Stock Performance

Marvell's growth potential is increasingly reflected in its stock performance. Shares have surged over 200% since the end of 2022, with a significant portion of this growth occurring just since mid-2023 as the company's research and development efforts gained traction in response to market needs.

Despite the impressive run-up in stock price, now sitting at a high valuation of 40 times the projected earnings per share of $2.76 for the next fiscal year, this may well be a case where a pullback in price presents a buying opportunity.

Even with such lofty valuations, high-growth stocks often maintain and even increase their premium. This trend is based less on immediate earnings and more on the potential profits the company might generate in five or ten years down the road.

Indicators show that Marvell Technology is strategically positioned to capture a significant share of the developing AI technology market. Analyst Cody Acree recently raised his target price for Marvell, highlighting that it is one of the only two companies providing custom silicon solutions that compete with Nvidia's GPU accelerators. Major players like Amazon and Google are collaborating with Marvell to develop specialized accelerators tailored to their AI-related needs.

Acree further emphasized the importance of these processors that are entering volume production now, along with Marvell's robust optical connectivity growth. The company is expected to surpass its revenue targets of $1.5 billion and $2.5 billion for AI tech in fiscal years 2025 and 2026, respectively.

Most of the analyst community views Marvell stock as a strong buy, even after its recent significant gains.

Final Thoughts on Investment Decisions

Will institutional investors, hedge funds, and billionaires eventually recognize Marvell Technology and add it to their portfolios? It's uncertain. Historical trends show that influential investors often miss emerging opportunities until much later. Just as many did not leap at Nvidia when it first took off, the same could happen with Marvell.

If you find Marvell's growth narrative and long-term potential appealing, don’t hesitate to consider buying the stock, even if it has reached record highs recently.

Note: Always make investment decisions based on your financial situation and after thorough research.

Nvidia, Marvell, Technology