Despite the concerns around AI stock valuations, some analysts believe companies are just getting started with the AI revolution and have a long runway for this bull run. Last month Cantor Fitzgerald analysts said in a note that AI semiconductor companies were positioned well heading into the second-quarter earnings season. They also said strengths in NAND and HDD markets and fiscal discipline make data storage companies attractive.
“We continue to believe that AI-leveraged names are still the most attractive to own heading into earnings,” Cantor analysts led by C.J. Muse said.
Cantor’s analysts said that companies that make semiconductor equipment are still in the early cycle of recovery.
“We are now five quarters into the recovery versus the average typical cycle of nine quarters and believe this cycle will be even more elongated,” they said.
Deutsche Bank also expects strong performance from AI-driven semiconductor stocks in the second-quarter earnings season. However, the firm observes that investors are becoming more selective. Analyst Ross Seymore highlighted that while optimism persists around the current AI leaders, there is growing caution about which companies will sustain or begin to show financial gains amid lingering uncertainty about the momentum’s longevity.
Melissa Weathers, another Deutsche Bank analyst, noted that semiconductor stocks have surged by 10-20% or more since the beginning of the second quarter, with price-to-earnings ratios approaching or exceeding previous highs. She emphasized that future upward movement will likely depend on revisions to earnings estimates.
For this article we picked 10 AI semiconductor stocks Deutsche Bank and Cantor Fitzgerlad are bullish on. 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).
Are Analysts Recommending Marvell Technology Inc (NASDAQ:MRVL) AI Semiconductor Stock Despite Selloff?
JPMorgan believes MRVL could “dominate” the custom 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).
Artisan Mid Cap Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in CCC Intelligent Solutions, Marvell Technology, Inc. (NASDAQ:MRVL) and Insmed. Marvell Technology is a semiconductor company offering networking, secure data processing and storage solutions to customers worldwide. We believe Marvell has among the broadest range of intellectual property in technological areas (e.g., high-bandwidth data switching and storage applications) that position it well for the growing requirements of data centers, wireless networks and autos. Several of the company’s product lines (e.g., custom silicon, optical connectivity and switching) are benefiting from the growth of AI data centers. And we believe a significant opportunity exists for the company to help design and manufacture cost-effective custom data center chips that would help cloud providers reduce their reliance on expensive graphics processing units (GPUs). Furthermore, like many other semiconductor companies, a portion of its business may be poised for a cyclical recovery after the industry’s recent inventory correction.”
Overall Marvell Technology Inc. (NASDAQ:MRVL) ranks 5th on Insider Monkey’s list Analysts are Recommending These 10 AI Semiconductor Stocks Despite Selloff. While we acknowledge the potential of Marvell Technology Inc. (NASDAQ:MRVL), our conviction lies in the belief that 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 MRVL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
