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Semiconductor stocks are doing great in the market, which means PHLX Semiconductor Division Index for the past year.graphic specialist Nvidia (NASDAQ:NVDA) played a leading role in this surge, with its stock soaring a whopping 233% during this period, driven by the company’s solid position in the artificial intelligence (AI) chip market.
Nvidia’s graphics processing units (GPUs) have seen huge demand thanks to their ability to train large-scale language models (LLMs) that form the backbone of popular applications such as ChatGPT. Each AI-focused GPU sold by Nvidia ranges in price from $10,000 to $30,000. It’s worth noting that the company is reportedly making nearly 1,000% profit on these chips, according to the investment banking firm. raymond james.
The AI chip market is expected to grow rapidly in the future, and NVIDIA is in a pole position to take full advantage of that growth. city Analyst Atif Malik thinks as follows. marvel technology (NASDAQ:MRVL) As a semiconductor, it may be better than Nvidia. Let’s see why.
Marvell Technology is becoming a solid player in new AI semiconductors
Citi analysts maintained a buy rating on Marvell stock, noting that the company is well-positioned to take advantage of growing demand for custom AI chips and optical modules that enable high-speed communications between data centers. But Malik isn’t the only one optimistic about Marvel’s prospects.
rick schafer oppenheimer expects sales to accelerate this year thanks to Marvell’s AI exposure, noting that demand for the company’s data center storage and switching solutions will further increase. Schaefer believes Marvell stands to benefit from multiple new product cycles and potential content gains, which explains why analysts are outperforming the stock.
A closer look at Marvell’s semiconductor solutions shows why Wall Street is optimistic about the company’s AI prospects. Marvell is known for manufacturing custom application-specific integrated circuits (ASICs), which the company says are customized “to the unique requirements of each AI, cloud data center, and OEM customer.” It is said that there is.
Some of the major cloud service providers to look out for include: microsoft, alphabetand meta platform We focus on developing custom ASICs to tackle AI workloads. These big AI players are developing custom AI chips because they help them unlock higher performance and power efficiency. This is not surprising since ASICs are programmed to run specific workloads and perform specialized operations, which in turn helps speed up AI training and inference models.
morgan stanley estimates that ASICs could account for 30% of the total AI chip market by 2027, and the investment bank believes it will be worth $182 billion by then. Therefore, based on Morgan Stanley estimates, the market for AI-focused ASICs could be worth nearly $55 billion annually in 2027. This could present a healthy growth opportunity for Marvel, considering it generated $5.5 billion in revenue over the past year.
How much upside can investors expect?
Marvell Technology reportedly controls 12% of the ASIC market JP Morgan. Assuming that Marvell can maintain this share in 2027, and that its AI-focused ASIC market actually reaches $55 billion, the company expects its AI-related revenue to reach an additional $6.6 billion. We expect it to increase. This is significantly higher than Marvell’s current quarterly revenue run rate of $200 million from AI-powered chip sales, and significantly higher than the $1 billion in revenue the company could generate from this market in fiscal 2025. (scheduled to start from the end of 2025). this month).
Analysts predict Marvel’s revenue growth will accelerate from a 7% decline to $5.5 billion in 2024, jumping to $6.1 billion in 2025 and $7.3 billion in 2026. . The pace of growth could be even faster once additional AI-related revenues are taken into account. As mentioned earlier, Marvel can be generated.
Assuming Marvel achieves $6.6 billion in increased revenue by 2027 (which coincides with most of fiscal year 2028), that top line could increase to $12 billion in four years, which This could more than double the projected $5.5 billion for fiscal year 2024. Multiplying the projected earnings by Marvel’s five-year average price-to-sales ratio of 8.6 points gives him a market cap of $103 billion, giving him a 71% increase from current levels.
Marvell currently trades at 11 times sales, which isn’t terribly expensive based on historical standards, especially given the new growth drivers the company could benefit from. So investors looking to buy AI stocks that aren’t as expensive as Nvidia, which trades at 33 times sales, could certainly benefit greatly from the growth in sales of custom AI chips in the long run. You could consider purchasing certain Marvell technologies. .
Should you invest $1,000 in Marvell Technology right now?
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JPMorgan Chase is an advertising partner of The Motley Fool’s Ascent. Citigroup is an advertising partner of The Motley Fool’s Ascent. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, JPMorgan Chase, Meta Platforms, Microsoft, and his Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
Wall Street Analysts Believe This Semiconductor Stock Outperforms Nvidia, Could Jump an Impressive 71% This article was originally published by The Motley Fool.
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