Shares of Marvell Technology surged nearly 12% in premarket trading on Friday after the semiconductor company issued an upbeat long-term outlook, betting on sustained demand for its artificial intelligence-focused chips and data centre networking technologies.
The rally shows that investors are confident that spending on AI infrastructure by major cloud providers will continue to fuel demand for specialised semiconductors used to power advanced computing systems.
The company said it expects revenue to reach about $15 billion in fiscal 2028, representing nearly 40% growth and comfortably above analysts’ consensus estimate of $12.92 billion, according to LSEG data.
Marvell also raised its fiscal 2027 revenue outlook, projecting more than 30% year-on-year growth to nearly $11 billion.
Industry-wide AI spending drives momentum
The optimistic forecast comes as spending on AI chips and supporting infrastructure accelerates across the semiconductor industry.
Broadcom, a major supplier of custom accelerators and networking silicon, recently projected that AI chip sales could exceed $100 billion next year.
Large technology companies, including Alphabet, Meta, Microsoft and Amazon, are expected to spend more than $630 billion on AI infrastructure this year.
Such investments are expected to drive demand for Marvell’s custom application-specific integrated circuits, or ASICs, and high-speed interconnect technologies that move vast volumes of data between AI processors, memory and servers.
That spending is “still growing massively,” President and COO Chris Koopmans said.
Investors’ concerns regarding concentration of risk
Despite the upbeat projections, investors remain mindful that Marvell and other AI chip suppliers rely heavily on a relatively small group of large customers.
Any reduction in orders from major hyperscalers could weigh on future growth.
Investors have also been closely monitoring Marvell’s customer relationships amid concerns that it could lose some business with Amazon to Taiwan’s AIchip Technologies and with Microsoft to Broadcom.
The latest results may help ease some of those worries.
Chief executive Matt Murphy said the pace of capital expenditure by cloud companies is likely to moderate slightly by fiscal 2028 compared with the current year, although spending will remain elevated.
Murphy added that Marvell’s revenue outlook is based on current demand trends and chip designs already in production.
For the current quarter, Marvell forecast revenue of about $2.40 billion, plus or minus 5%, above analysts’ estimates of roughly $2.27 billion.
The outlook includes contributions from newly acquired companies, Celestial AI and XConn Technologies
Analysts are bullish
ASICs are specialised chips designed for a specific task or workload, offering higher efficiency compared with general-purpose processors such as graphics processing units.
Their growing use in AI systems is creating new opportunities for chipmakers that can tailor designs to the needs of large cloud providers.
Morningstar analyst William Kerwin said Marvell’s confident long-term guidance appears credible given the scale of industry investment.
Analysts also expect demand to rise for Marvell’s optical digital signal processor chips, which support high-speed data connections inside AI servers.
The company’s data centre business is seen as a major growth engine over the next several years.
Even with the recent rally, Marvell shares trade at a forward price-to-earnings ratio of about 20, below Broadcom’s roughly 25, according to LSEG data.
“Marvell’s shares, like many AI-related names, have underperformed the semiconductor group in the past two quarters. We think the better-than-expected results and outlook, while expected, are more of a relief for investors than confirming the near-term data centre spending strength,” said Kinngai Chan, senior research analyst at Summit Insights.
“Marvell clearly has a robust opportunity set across custom ASICs, interconnects, and now scale-up photonic, and we look forward to seeing it execute (and perhaps even exceed) these new targets,” Susquehanna analyst Christopher Rolland wrote in a research note.
Rolland reiterated a Positive rating and $100 target price on Marvell stock.
“While we maintain our view that Marvell is currently sharing Amazon’s next-generation Trainium 3 design work with Alchip, we believe it ultimately doesn’t matter in the overall grand scheme of the company’s multiple-layer growth drivers,” Benchmark Research analyst Cody Acree wrote in a research note Friday.
Acree raised his rating on Marvell stock to Buy from Neutral, with a target price of $130.
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