HSBC Global Investment Research started coverage on Marvell Technology (MRVL) with a Hold rating and a price target of $85, noting that the application specific integrated circuits, or ASIC, business downside is offset by AI optical segment gains.
Analysts led by Frank Lee said that Marvell is emerging as an important AI player, driven by its ASIC and optical business.
The analysts noted that the capital expenditure of hyperscalers is a good proxy for demand for ASIC. “Given the big increases in hyperscalers’ capex forecasts, we think that ASIC’s share of this capex will rise from 2% in 2023 to 13% in 2027e. While Marvell is bullish about its ASIC strategy, we don’t share its optimism. We expect Marvell’s key rival Broadcom (AVGO) to benefit the most as its ASIC roadmap has greater visibility,” said Lee and his team.
Year-to-date, Marvell’s stock has fallen about 29%, while Broadcom’s shares have surged around 47%.
“While we believe Amazon (AMZN) remains Marvell’s biggest ASIC customer, we think Marvell does not have a significant share of the current-generation Trainium 2/ Trainium 2.5 chips, which Amazon is mostly designing in-house. For the latest-gen Trainium-3, we believe Marvell will lose more share as Al chip has won the majority of the business,” said the analysts.
The analysts added that Marvell’s next big ASIC project is with Microsoft (MSFT) but they expect this to be delayed until at least 2027, as they do not see Marvell procuring enough chip on wafer on substrate, or CoWoS, for 2026. HSBC noted that its fiscal year 2027 ASIC revenue estimate of $2B (up 12% year-over-year) is 10% below consensus ($2.3B, 26% year-over-year growth).
“While ASIC moves the share price, Marvell’s market-leading AI optical segment, driven by digital signal processor (DSP) chips, is still the main source of revenue. We believe the launch of Broadcom’s 800G and 1.6T DSP solutions will intensify competition with Marvell,” said Lee and his team.
The analysts added that despite this, their fiscal 2027 optical revenue estimates of $2.5B (+38% year-over-year) are 14% above consensus of $2.2B (+20% year-over-year) on more bullish DSP momentum from the expansion of the total addressable market, or TAM, for 800G and the ramp-up of 1.6T.
The analysts noted that thus, their total fiscal 2027 data center revenue estimate of $7.1B (18% year-over-year) is in line with consensus and aligned with the company’s management’s recent reiteration of expectations of 18% year-over-year growth, which is in line with its estimate for hyperscalers’ capex growth.