Marvell Technology Faces Historic Plunge Amid Disappointing AI Forecast

(Bloomberg) — Marvell Technology Inc. experienced a significant decline in late trading, marking its worst drop since 2001. The company’s revenue forecast fell short of expectations, disappointing investors who anticipated a more substantial return from the booming AI sector. Marvell projected sales of approximately $1.88 billion for the fiscal first quarter, which concludes in April. While this figure aligns with the average analyst estimate, it is notably below some projections that reached as high as $2 billion.

Marvell’s Role in the AI Boom

Marvell has been recognized as a pivotal player in the artificial intelligence computing landscape, which has heightened expectations for the chipmaker. Just three months prior, the company reported better-than-expected results, propelling its shares to a record high. Based in Santa Clara, California, Marvell specializes in chip design services, assisting major technology clients in developing their own data center semiconductors. These so-called hyperscalers, including Amazon.com Inc., one of Marvell’s largest customers, have been intensifying efforts to produce processors internally. This strategy aims to optimize their computer networks for AI software and services.

Investor Concerns Amid AI Stock Rout

However, the AI sector has faced a stock rout this year, as investors have grown increasingly concerned about potential spending slowdowns from customers. The situation was exacerbated by Chinese startup DeepSeek, which introduced an AI model that it claimed was relatively inexpensive to produce. This development raised alarms that the industry may not require as much costly equipment as previously thought.

“Investors were already very ‘skittish’ about AI names the last few weeks,” noted Tore Svanberg, an analyst at Stifel Financial Corp. He added that Marvell’s report “probably doesn’t help calm those nerves.” The ripple effect of Marvell’s disappointing forecast was felt across the industry, with Broadcom Inc., another chipmaker linked to the AI surge, also experiencing a decline. Broadcom’s stock fell 3.5% in after-hours trading, just ahead of its own quarterly report set to be released on Thursday.

Financial Performance and Market Reactions

In its fiscal fourth-quarter results, Marvell reported a revenue increase of 27% year-over-year, reaching $1.82 billion, which surpassed the analyst consensus from Visible Alpha. Adjusted earnings rose to $531.4 million, or 60 cents per share, up from $401.6 million, or 46 cents per share, a year earlier, and exceeded expectations. Notably, revenue from its data center segment surged by 78% to $1.37 billion, driven by robust demand for infrastructure.

Despite these positive results, Marvell projected fiscal first-quarter revenue of $1.875 billion, with an adjustment range of 56 cents to 66 cents per share. These projections were generally in line with analyst consensus. However, the outlook for Marvell was particularly high heading into the results, with Bank of America analysts anticipating AI-driven upside and a “largely better” forecast.

Market Impact and Future Outlook

Following the release of its forecast, Marvell shares plummeted by 15% in after-hours trading on Wednesday. This decline came despite the stock being up about 11% over the past year leading up to Wednesday’s close. The volatility in Marvell’s stock reflects broader concerns about the sustainability of growth in the AI sector and the potential impact on chipmakers.

As the market continues to react to these developments, investors will be closely monitoring Marvell’s performance and the overall health of the AI industry. For more details, you can read the original article here.