Marvell Technology’s stock has taken a substantial hit, plummeting nearly 20% following disappointing guidance that failed to meet the high expectations set by some investors. In its forecast for the upcoming fiscal quarter, Marvell anticipates sales of approximately $1.88 billion—marginally surpassing the analyst expectation of $1.87 billion as reported by LSEG. However, this forecast fell short of the $2 billion revenue predicted by certain investors, leading to significant discontent after a remarkable 83% stock increase earlier in 2024.
Concerns surrounding Marvell’s collaboration with Amazon Web Services on its AI chip, Trainium, have surfaced, casting a shadow over the potential for growth in the company’s custom application-specific integrated circuits (ASICs) business. “The strong numbers didn’t meet the elevated benchmarks set by the rest of Amazon’s supply chain,” noted Tim Donovan, an analyst at Barclays. He emphasized that despite Marvell’s optimistic outlook for their ASIC prospects, the near-term Amazon figures were somewhat disappointing, which is critical in a market that heavily scrutinizes companies for not meeting lofty AI expectations.
Marvell is recognized for its tailored semiconductor solutions utilized in data centers, networking, and infrastructure. The company has capitalized on the AI surge, which has propelled the semiconductor sector, yet it grapples with heightened expectations regarding financial results.
In the fourth quarter, Marvell reported adjusted earnings per share of 60 cents, with revenue totaling $1.82 billion. This slightly edged past the earnings per share estimate of 59 cents and the revenue prediction of $1.80 billion, also according to LSEG. Notably, data center revenues reached $1.37 billion, narrowly exceeding the average estimate of $1.36 billion.
Additionally, the broader semiconductor sector experienced declines alongside Marvell, evidenced by the VanEck Semiconductor ETF dropping 4%. Major players such as Nvidia and Broadcom both fell over 5%, while Taiwan Semiconductor saw a decrease of nearly 4%.
As the semiconductor landscape continues to evolve, investors are advised to stay vigilant regarding the implications of Marvell’s performance and its influence on the market dynamics within the AI sector.
