By Priyanka G and Max A. Cherney
(Reuters) -Marvell Technology forecast first-quarter revenue in line with Wall Street estimates on Wednesday, but the chipmaker’s shares plunged 15% in extended trading as it failed to excite investors who had expected stronger artificial intelligence-driven growth.
Surging demand and the resulting shortage of AI chips have driven up the prices of sector-leader Nvidia’s AI processors. As a result, the biggest tech companies such as Microsoft, Meta Platforms, and Amazon.com are reducing their reliance on Nvidia by developing their own AI processors.
This strategic shift has also benefited chipmakers such as Marvell and Broadcom.
“The earnings print was generally OK, but I believe investors were expecting more given all the bullish data points in the overall AI space and the ramp of custom ASICs (AI chips) with certain hyperscalers,” said Tore Svanberg, an analyst at brokerage Stifel Nicolaus and Co.
Marvell’s data center segment revenue grew 78% in the fourth quarter from a year earlier to $1.37 billion, boosted by a surge in demand for custom AI chips from businesses looking to optimize their AI workloads.
The company signed a five-year chip-related deal with Amazon in December, which includes custom AI chips.
“We’re engaged, we expect revenue to grow, but obviously, it’s like anything, you’ve got to show you can do it, and you’ve got to show it consistently,” Marvell Chief Operating Officer Chris Koopmans said. The Amazon deal is “sticky” he added.
Marvell reiterated that it will focus its investments on data centers, compared to other end markets, to “fully capitalize” on the AI boom. Data center revenues accounted for 75% of its overall quarterly revenues.
Koopmans said, thus far, Marvell had not seen any signs of tariffs – now or expected – affecting its data center business.
Marvell’s shares tumbled to $77.65 in extended hours on Wednesday. They rose over 83% in 2024, while larger competitor Broadcom’s stock had jumped about 107%.
“Shares are down sharply despite the good results, with some likely concerned about the magnitude of the beat, geopolitical pressures, and broader concerns about AI monetization,” said Angelo Zino, an equity analyst at CFRA Research.
The company forecast first-quarter revenue to be $1.88 billion, compared with analysts’ average estimate of $1.87 billion, according to data compiled by LSEG.
(Reporting by Priyanka.G and Kritika Lamba in Bengaluru and Max A. Cherney in San Francisco; Editing by Krishna Chandra Eluri, Rashmi Aich and Muralikumar Anantharaman)
