Analysts Are Bullish on Marvell Stock Despite Amazon Deal Concern

Marvell Technology's recent earnings, while showing 63% sales growth and beating EPS estimates by a cent, failed to excite investors, leading to a 5.5% stock drop and continued underperformance relative to the semiconductor sector. Despite this, analysts maintain an average price target of $92, implying a 53% upside, driven by confidence in Marvell's AWS and Microsoft partnerships for custom AI chips, although competition from companies like AIchip remains a concern. Management commentary suggests ongoing collaboration with AWS on Trainium 3, but acknowledged the possibility of AWS pursuing multiple vendors, while also highlighting progress on AI XPUs with another hyperscaler, likely Microsoft.

Analysis

Marvell Technology (MRVL) has notably underperformed the broader semiconductor sector, including peers like Broadcom (AVGO) and the iShares Semiconductor ETF (SOXX), with its shares declining approximately 5.5% following its May 29 earnings release and remaining down about 45% from its May 30 closing price. Despite this, the company reported fiscal Q1 2026 sales growth of just over 63%, slightly exceeding the 62% anticipated, and beat adjusted EPS estimates by one cent at $0.62. Guidance for fiscal Q2 sales and EPS was marginally above analyst forecasts. The data center end market was a key strength, with revenue growing 76% year-over-year, and four out of five end markets saw annual growth. Management provided crucial updates on its hyperscaler relationships, confirming its AI XPU program for AWS's Trainium 2 chip is progressing well and that Marvell is "fully engaged" on the next-generation Trainium 3, expected to ramp production in calendar year 2026. However, management acknowledged that AWS might engage multiple suppliers, lending credence to concerns about competition from AIchip Technologies. Marvell also reported progress on an AI XPU with another major hyperscaler, believed to be Microsoft. Despite the stock's weak performance, attributed partly to general chip stock declines amid renewed US-China trade tensions, Wall Street analysts maintain a positive outlook, with an average price target around $92, suggesting a 53% upside. Even the most bearish analyst target of $60 is close to the recent trading price, indicating perceived limited downside. An upcoming event on June 17, focusing on Custom Silicon Technology for AI Infrastructure, could serve as a near-term catalyst.

Key Decisions for Investors

• Investors should evaluate whether Marvell's significant stock price lag relative to the semiconductor sector, despite solid Q1 earnings showing 63% sales growth, presents a compelling entry point, especially considering the average analyst price target implies substantial upside.
• Closely monitor developments in Marvell's custom AI XPU engagements with Amazon Web Services for Trainium 3 and the other large hyperscaler, paying particular attention to the competitive landscape, including AIchip, and the implications of non-exclusive supply agreements.
• Consider the upcoming June 17th event on AI infrastructure as a potential catalyst that may provide further insight into Marvell's technological roadmap and its ability to capitalize on custom silicon demand from hyperscalers.
• Factor in the impact of macroeconomic headwinds, such as US-China trade tensions and potential sanctions on China's tech sector, which have previously affected Marvell's stock and could continue to pose risks to the broader semiconductor industry.