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Analysts Think Marvell Technology Inc (NASDAQ:MRVL) Can “Dominate” Custom Chips AI Market

We recently published a list of top 10 AI stocks Wall Street analysts are upgrading. MRVL ranks 7th in the list. That's why the stock deserves a deeper look.

There has been much uproar about AI stock valuations and how investors are overpaying for mega-cap tech stocks that are promising something that still lies far into the future — productivity gains, real-life AI products and AGI. But the market doesn’t seem to care what the AI skeptics and naysayers believe. There seems to be no end in sight to the AI-led gains in stocks. And analysts are expecting more. Goldman Sachs's Scott Rubner recently said that he sees a "wall of money" heading towards the market. Rubner pointed towards the whopping $7.3 trillion sitting in money market funds and said he believes the floodgates are about to open and investors would funnel that money into stocks. According to Rubner's model, the third quarter of 2024 is when we should expect billions ($29 billion, to be precise) to be flushed into the market.

One doesn’t need to have a crystal ball to know where all of those billions would be headed. AI is the promising theme everyone is betting on and that everyone includes experts, billionaires, money managers and long-term value investors. Tom Lee, Fundstrat Global Advisors co-founder, recently said in a program on CNBC that investors have been "hesitant" for much of the year, but they should just "stick" with "what's working." AI, weight loss drugs and related themes is what's working these days, according to Lee.

Methodology

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For this article we picked the top AI stocks Wall Street analysts recently upgraded or gave bullish comments about. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

An overhead view of the financial district with busy traders on the trading floor.

Marvell Technology Inc (NASDAQ:MRVL)

Number of Hedge Fund Investors: 87

Marvell Technology Inc (NASDAQ:MRVL) is another stock JPMorgan believes could "dominate" the customer application-specific integrated circuit, or ASIC, market. Analysts at JPMorgan estimate that Marvell Technology Inc (NASDAQ:MRVL) could generate between $1.6 billion and $1.8 billion in AI revenue from ASICs and networking this year and between $2.8 billion and $3 billion next year.

Marvell Technology Inc (NASDAQ:MRVL) shares recently tumbled following mixed Q1 results. However, some analysts believe the stock could be an opportunity to buy on the dip. Oppenheimer analyst Rick Schafer maintained his outperform rating on the stock and upped his price target to $90 from $80.

Analysts believe that Marvell Technology Inc. (NASDAQ:MRVL) could be the next major AI play as Marvell Technology Inc. (NASDAQ:MRVL) begins to roll out AI-specific products like Spica™ 800G PAM4 DSP platform for optical interconnects. Marvell Technology Inc. (NASDAQ:MRVL) also sells Application-specific integrated circuits (ASICs) for data centers, which are seeing a huge boost amid the AI revolution.

According to data compiled by Yahoo Finance, average Wall Street price target for Marvell Technology Inc. (NASDAQ:MRVL) is $87.7, which represents a 14% upside potential from the current levels.

However, Marvell Technology Inc's (NASDAQ:MRVL) negative revenue growth has alarmed many especially when peers are growing at a faster pace. In the first quarter, revenue fell 12.2% on a YoY basis.  Marvell Technology Inc (NASDAQ:MRVL) has a $3 billion of net debt. In fiscal 2025, Marvell Technology Inc's (NASDAQ:MRVL) FCF is expected to come in at $1 billion, excluding taxes and management's stock options. While the stock's PE ratio (TTM) is 52, it's trading at 32X 2025 EPS estimate. This makes Marvell Technology Inc. (NASDAQ:MRVL) a stock to consider only for the long-term. In the short-term there are much better options to invest in the AI space other than Marvell Technology Inc. (NASDAQ:MRVL).

Overall, Marvell Technology Inc (NASDAQ:MRVL) ranks 8th in Insider Monkey’s list of Analysts are Upgrading These 10 AI Stocks. You can visit Analysts are Upgrading These 10 AI Stocks to see the other AI stocks that are on analysts' radar. While we acknowledge the potential of Marvell, our conviction lies in the belief that smaller, under-the-radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Marvell but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.

Disclosure: None. This article is originally published at Insider Monkey.