Marvell Technology (MRVL) shares slumped more than 6% in premarket trading on Monday as Benchmark downgraded the semiconductor company. The investment firm said it has “high degree of conviction” that Marvell lost design work on Amazon’s (AMZN) chips to a competitor.
“Following two days of extensive industry meetings during our recent Silicon Valley bus tour, we are downgrading our rating on Marvell from Buy to Hold, as we now have a high degree of conviction that the company has lost both Amazon’s Trainium3 and 4 designs to its Taiwanese competitor, Alchip,” Benchmark analyst Cody Acree wrote in a note to clients. “We expect this is the primary factor in the company’s projected slowing to only 20% XPU growth in CY26.”
Delving deeper, Acree said the Marvell downgrade is likely to be “controversial,” especially since Marvell said on its most recent earnings call that it would not have an “air pocket” in revenue from its top XPU customer, Amazon.
“While we believe the company is being forthright in its guidance for increasing annual Amazon revenue, we believe this commitment is driven by expected continued Trainium2 volumes and a Kuiper low-earth orbit engagement and not the successful transition to Trainium3 designs that many on the sell-side have concluded,” Acree added. “As Amazon’s recently announced Trainium3 is only the air-cooled version for customer evaluation, with its liquid cooled variant not expected until at least mid-next year, we expect 2026 Trainium2 volumes to continue to support Marvell’s near-term forecasts.”
Marvell and Amazon did not immediately respond to a request for comment from Seeking Alpha.